Travel insurance: Everything you need to know about covering your trip

 In the COVID era, is travel insurance now a worthwhile expense?

We're in the middle of the holiday travel season, and due to the quickly spreading omicron COVID variant, new travel restrictions are in place. With all the factors out of our control that could lead a trip being canceled or postponed, is purchasing travel insurance worth it? 

Travel insurance is not the same as trip protection, even though it sounds like the same thing, and many travelers think they're interchangeable. Travel insurance is a regulated product underwritten by an insurance company. Trip protection, which is often offered by travel agencies or travel companies, is less comprehensive and less expensive, and it typically only offers to waive a fee or to give you a credit for canceling your trip. 

Early in 2020 when the pandemic first started, travel insurance didn't always cover trip cancellations due to the shutdown. But now, deep into the second year of the pandemic, travel insurance policies have changed, offering more COVID-related protections. 

If you're traveling this holiday season, we'll tell you about travel insurance coverage for COVID-related cancellations, how it's different from trip protection, and what to consider before making a purchase. 

What is travel insurance?

Travel insurance is a major type of insurance policy overseen by state insurance regulators. By purchasing a travel insurance plan, you could be reimbursed for losses that may arise while you travel. Covered incidents can range from unexpected inconveniences such as delayed baggage, to major interruptions such as illness or injury. 

As always, check with official sources regarding visa and travel requirements to your specific destination, since you don't want to be caught off-guard. If you want to take a trip to Cuba, for instance, you may be surprised to find you need non-US medical insurance, according to the Department of State. A trip insurance policy will cover this requirement.

What does travel insurance actually cover?

The typical travel insurance policy consists of two elements: trip cancellation services and health costs. 

Trip cancellation

If you're unable to travel due to an unforeseen event, travel insurance will reimburse you for the nonrefundable upfront costs, like flights and hotel reservations that otherwise can't be refunded. Unforeseeable events typically include things you have no control over that prevent you from traveling, such as inclement weather, an injury or a sickness -- which now includes COVID-related illness in most (but not all) cases. 

This wasn't on offer when the shutdowns started. "[The public] was nervous because most insurance policies had pandemic exclusions," said Michael Giusti, an analyst at Insurance Quotes. "But the travel industry pivoted toward the consumer and included COVID under the policies. And so, if you get sick with COVID and can't travel, they'll cover your expenses."

Unforeseen events caused by preexisting conditions are even covered. For instance, if you have asthma and experience an attack, that still counts as an unforeseen event, according to Giusti. Foreseen events, such as traveling during your eight month of pregnancy, are not covered.

Government mandates that may come into effect while you're traveling aren't necessarily covered either, Giusti said. This means that, if you can't get on a flight because of a new mandate, you may not be covered by your policy. And fear of travel is also not covered -- so if you're afraid to travel due to concerns of contracting COVID, your travel insurance policy won't reimburse your trip.

Health expenses

The second portion of the typical travel insurance policy covers health costs if you're outside of your home insurance network while traveling. This often includes doctor's visits for smaller illnesses, say, a stomach bug, as well as emergency services, including medical evacuations. Your travel insurance company will pick up the tab for whatever your health insurer won't cover (depending on your plan and deductible). Read the fine print to ensure this is included in your plan.

What about trip protection? How is it different? 

While travel insurance can offer financial coverage for rental damages, lost luggage, flight delays, medical bills and ticket cancellation, trip protection usually only lets you change, cancel or refund a trip purchase (such as a flight or hotel). You'll often find airlines offering the option to purchase trip protection when you purchase a ticket online, which can help you recoup your money or offer you a travel credit if you have to cancel a flight.

Trip protection, also called travel protection, is not offered by hotels but can be purchased when booking a cruise. Footing the bill for cruise line trip protection is generally not recommended though, since the coverage is extremely limited when you dig into the fine print, according to Benét J. Wilson, a senior editor for The Points Guy.

Premium credit cards may also offer coverage for some travel expenses as a cardmember perk. This coverage is usually labeled as travel insurance, but offers a modicum of what you would typically get when purchasing through an insurance agency. What's covered depends on the card, but typically, you're looking at coverage for emergency evacuation, death, loss of eyesight or losing limbs, according to Wilson.

To make sure you're purchasing a true travel insurance policy, don't just look for the word "insurance" -- make sure to look for a well-known travel insurance brand that works with a travel insurance underwriter, like Allianz Travel Insurance. Additionally, you can make sure the company you're purchasing from is listed on AM Best and the US Travel Insurance Association before buying.

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