How Does Travel Insurance Work?

Think about it; you have insurance for everything important to you. You probably have home insurance or renter’s insurance. You likely have life, car, and health insurance too. So why wouldn’t you insure your vacation?


Written by Echo Wang | Edited by Bianca Versoza

When it comes to protecting the things that matter most to you, insurance is there as a safeguard and in cases of emergency. Whether you rent or own your home, you probably wouldn’t feel too comfortable not being insured. You probably also have life, car, and health insurance too. So why wouldn’t you insure your vacation?

Deposits on trips aren’t always refundable, which means you could be out thousands of dollars for an unforeseen circumstance. So, why risk it? We’ll be diving into how travel insurance works and help you assess if you need it for your next trip.

Travel Insurance: A Break Down

No one wants to think of missing a trip to some far-off destination, but it happens.

Many believe travel insurance will only cover your deposits if you end up sick before your trip, but it doesn’t work quite like that. Travel insurance will cover all sorts of things beyond illness, including a premature end to your trip for various reasons.

Let’s say you head to Costa Rica to zipline through the rain forest, only to break your wrist on the second day there. Travel or trip insurance can reimburse you for the remainder of your stay so that you’re not stuck paying for things you couldn’t do. It may also cover a trip to the emergency room.

Trip insurance will reimburse you for other unfortunate events, too. If there’s bad weather that forces a flight cancellation or horrific damage to the place you’re traveling to, your travel insurance will cover it. If you get called in for jury duty and can’t postpone, travel insurance will reimburse you. The same thing applies if you have a work emergency and suddenly can’t get away.

Of course, every travel insurance provider is slightly different, so you’ll need to read the fine print on your agreement. In general, though, if there’s weather, a work emergency, or illness to blame, travel insurance will help cover the cost.

In return, you pay an upfront fee. Typically, travel insurance costs between 5% and 8% of your total trip cost. Depending on where you’re going, that can be a steep inclusion. Still, it may be worth it.

On top of reimbursing you if you have to cancel your plans, travel insurance tends to cover lost luggage reimbursement and, if the worst case scenario, travel insurance will provide a small death benefit.

Getting Travel Insurance

When you book your trip, you’ll usually have the option of buying insurance. Sometimes providers will partner with airlines or other travel package sites, like Expedia or Travelocity. You’ll see an option to add travel insurance to your trip when you checkout on those sites.

Alternatively, you can buy travel insurance separately. There are tons of travel insurance companies online. It’s always a good idea to compare quotes to get the best in price and coverage. As a general rule, insurance should cost no more than 8% of your total trip.

How to File a Travel Insurance Claim

If you have an emergency that changes your plans, or if something happens while you’re on your vacation, you need to call your travel insurance provider right away. Keep detailed records of the incident so you can give your provider the information they need, such as times, dates, doctor’s notes, and bills.

Your insurance provider will handle the claim and reimburse you appropriately.

Final Thoughts

Travel insurance seems unnecessary until it isn’t. If you’re planning a big trip, it’s certainly worth considering. The fees seem steep up front, but you might change your mind once you understand how travel insurance works.

Travel insurance covers more than a canceled trip; it covers emergency medical care, lost luggage, and other issues. Plus, you can’t put a price on its biggest benefit: the peace of mind it gives you! Bon Voyage!