7 things to look out for when buying travel insurance, according to an expert

If, as it's said, taking a vacation without travel insurance is like leaving the house without an umbrella, then taking one with the wrong insurance is like going out holding a plastic bag above your head.

Your hair might stay dry, but you're still getting wet. And that dry-cleaning bill won't pay for itself.

But the bill for a vacation disaster can run into the thousands.

Which is to say, when it comes to travel insurance — if you're not covered by complimentary travel insurance on your credit card — you need to buy smart. We spoke to travel insurance specialist Michael Pettifer, managing director of MPI Brokers, for some tips on how to stay dry when unforeseen bills rain down.

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Book your travel insurance when you book your trip

"It may well be that the name is misleading," said Pettifer. "'Travel insurance' suggests it is only for traveling. Whereas 30% of claims are by people who haven't even left. Perhaps they got sick or injured and couldn't go. I always say you must have travel insurance from the date of booking to the date of return."

He added: "COVID-19 not only laid bare the deficiencies of some of the policies out there, but it also laid bare consumers' misunderstanding of what travel insurance is. And they've finally come to the realization that you need to book your travel insurance for when you've booked your trip. Not a few days before you travel."

Cancellations caused by government action

"This, of course, is another issue COVID-19 brought sharply into focus," Pettifer said. "The pandemic did not cause claims for cancellations. COVID-19 was the proximate cause. What caused the claims was the government shutting down air travel. In many policies, that wasn't covered.

"In some cases, like at MPI, policies did cover it and insurers began paying out, until they decided not to. So we're taking action because of that."

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Check the insurance rules in the country you're going to

"During the pandemic, many destinations found vacationgoers arriving with no travel insurance at all," explained Pettifer. "Then they got COVID-19. Some ended up in hospital where the money racked up, only to find they hadn't got the insurance to pay for it. That cost states money they didn't want to pay.

"So now, we are finding more and more destinations are obliging airlines to check people have travel insurance. So you could get to the check-in and be asked to produce your travel insurance document. Well, if you haven't got one, you won't be allowed on the plane.

"That's a new thing, and it is happening a lot."

Related: TPG's comprehensive guide to independent travel insurance — including coronavirus coverage

Ensure the full cost of your holiday

"This is something else COVID-19 has laid bare: In the cancellation section, we've noticed people underinsuring by mistake," Pettifer said. "They buy a policy with, say, 3,000 pounds (about $3,760), but their holiday cost is closer to 6,000 pounds (about $7,520). Then their flights are canceled, and they lose a lot of money because they didn't compare the sum insured in the cancellation section with the cost of their holiday."

He added: "It is even feasible that an insurer could say, 'Well, you underinsured your holiday and that is a material fact, so we're not paying anything.'"

Related: When to buy travel insurance vs. when to rely on credit card protections

Personal liability is key

"This, effectively, covers bumping into other people, whether that's in a car or on a ski slope," he continued. "Underinsuring for causing injury to a third party is one of the most costly insurance mistakes there is.

Related: Things go wrong on your flight? Here's what to ask for

"Ideally, one should be aiming for the maximum limit of indemnity. We give 5 million pounds ($6.3 million) in normal circumstances, while I think some of our carriers are giving 2 million pounds ($2.5 million). That should be enough unless you ski into an American lawyer in America. That's when you can be in big trouble."

Does your third-party liability cover travel companions?

"It's also quite common for there to be an exclusion for any claim brought against the person who caused the injury if that person is on holiday with you," said Pettifer. "In other words, if your traveling companion brings a claim against you, then it's excluded under the policy.

"And let's face it, the most likely person you're going to ski into is your mate."

Bags get lost

"It can be a real pain filing a claim for lost baggage," Pettifer shared. "You have to prove you lost it, you have to prove you owned it, and what it cost. And if the airline loses it you've got to report it to the airline at the airport immediately and get a Property Irregularity Report. And often the airline is responsible so you'll get some money from the airline and the balance comes from your insurance."

Bottom line

Travel insurance can be confusing and may seem like an overly time-consuming piece of administration you don't need before a big trip. However, it's more essential than ever. When it comes to the best policies, you get what you pay for. The less you pay, the less you will be covered if the worst does happen.

When booking travel insurance, make sure you read the fine print and ask questions to ensure you're covered for all eventualities. And don't leave it until the last second!