The Value of Travel Insurance

Is travel insurance a rip off, as Forbes Magazine tries to tell you, or a way to protect your vacation investment in these days of weather and natural disasters, strikes and more?

The Value of Travel Insurance
By John Stone
Published on: June 4, 2010

These days your clients have more reason than ever to ask you as their travel agent about whether they need to purchase insurance when booking their next vacation. This year, which is less than half old, has already seen massive floods in Machu Picchu, Rio de Janeiro and Nashville. It has seen at least four major earthquakes affecting such destinations as Haiti, Chile, China and Mexico. And, more recently, it has seen the unprecedented closure of northern European airspace for a week in April, with briefer subsequent disruptions since then, due to volcanic ash clouds from the Iceland eruptions.

In each of these disasters many trips to affected destinations were cancelled or delayed for many hours, if not days, forcing travelers with prepaid itineraries or unplanned expenses to face substantial financial losses. For those who purchased a comprehensive travel insurance plan prior to the outbreak of the specific disaster that disrupted their trip, their prepaid funds could be protected and their unplanned expenses reimbursed. Without such coverage, as widely reported in the consumer media in the past month, most travelers had to incur significant costs and lost any monies paid for their trip.

It therefore came as a surprise to me when I read the popular financial website Forbes.com describing travel insurance as a “rip-off” in its May 18, 2010 column, “10 Ways You’re Getting Ripped Off.” Forbes.com made no effort to present its two-paragraph “rip-off” proclamation as the opinion of the writer and her single source identified in the column. Instead, the article, presented as informed financial advice, saw nothing good to say about either travel insurance or the travel agents who sell it.

“[Travel insurance] is not a good economic decision for most people," said the official from the Consumer Federation of American, whom Forbes.com quoted. “If you just can't sleep without insurance, don't buy from someone who's selling you something else. It's almost always a bad deal involving kickbacks to whoever is offering the service." The Consumer Federation official further argued that homeowners’ insurance and credit cards can cover cancelled flights, without providing any documented examples of how this could work.

Fortunately for consumers and agents, the U.S. State Department has an opposite opinion from that of Forbes.com, as stated on its website (www.travel.state.gov) under the topic of travel “health issues.” Unlike Forbes’ dismissal of insurance, the State Department sees the necessity for travel insurance to prevent major consumer losses due to unforeseen risks while traveling.

“Obtaining medical treatment and hospital care abroad can be expensive, and medical evacuation to the U.S. can cost more than $50,000,” the State Department says. “Note that U.S. medical insurance is generally not accepted outside the United States, nor do the Social Security Medicare and Medicaid programs provide coverage for hospital or medical costs outside the United States. If your insurance policy does not cover you abroad, it is a good idea to consider purchasing a short-term policy that does.”

In addition to citing the disasters over the past few months that could be covered by pre-purchased travel insurance, you should not hesitate to present to your clients some other potential uncertainties that can be covered by a good travel insurance plan. Here are just a few examples:

• Trip Cancellation or Interruption coverage when a steady job is lost between pre-booking and travel, or the boss says you must work on dates on which you are booked to travel.

• Trip Cancellation or Interruption coverage when a client cancels due to the illness or injury of a family member, whether that relative is scheduled to go on the trip or not.

• Trip Cancellation or Interruption when the supplier providing the trip goes bankrupt and defaults before departure or during the trip.

• Trip Cancellation coverage when the school attended by a client’s child needs to extend the school year calendar into a pre-booked vacation date to make up for snow days.

• Trip Cancellation when the client or travel companion is involved in a car accident en route to the departure airport.

• Trip Interruption when clients learn that their home was burglarized after they left on their vacation.

Now you may still encounter clients, like the Consumer Federation official quoted by Forbes.com, who want to accept the financial responsibility for themselves, regardless of risk. If they sign a waiver saying they heard the insurance recommendation but rejected coverage, you have done your job. However, the outright dismissal of travel insurance without reviewing its content, as suggested by Forbes.com, is when the true “rip-offs” occur. This is when unforeseen trip disruptions cause travelers who did not buy travel insurance are truly separated from their hard-earned, prepaid travel investments.

John Stone, a veteran travel trade journalist, is media relations manager for Travel Insured International in Hartford, Ct.

Over the years, I, personally, have had time that I have used travel insurance and that one claim more than made up for all of the policy premiums that I have spent. Travel insurance is never mandatory. I offer it to my clients as an option- and a highly recommended one at that.