Do You Need Travel Insurance for Your Overseas Trip?

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Main takeaways

• Travel insurance may include trip cancellation or interruption coverage, trip delay reimbursement, emergency medical benefits, baggage protection and theft coverage.

• Most regular health insurance plans provide limited, if any, coverage when you travel abroad.

• Comprehensive travel insurance plans typically cost about 3% to 8% of your prepaid trip expenses, depending on the insurer, coverage limits and optional add-ons.

• Some travelers already have protections through premium credit cards or existing insurance, so buying only the coverage you’re missing can reduce the cost.

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Invaluable protection or unnecessary cash-grab? That’s the underlying question when it comes to buying travel insurance for the international trip you’re planning. 

Unfortunately, there’s no one-size-fits-all answer. What it really comes down to is your financial risk tolerance if something should go array while you’re away—and whether you already qualify for reimbursement without having to pay for separate insurance. 

Before deciding whether to pony up for a policy, you’ll want to understand what they typically cover and whether you really need it. 

What does travel insurance cover?

“Travel insurance” is really an umbrella term that encompasses a number of different travel-related benefits. Often, it’s sold as a comprehensive package that includes all of the following elements, although cheaper plans may focus on just medical expenses or trip cancellation. 

Trip cancellation or interruption

Even the most thoughtfully prepared itinerary can run up against unforeseen realities. But a travel policy will refund you for certain prepaid, non-refundable expenses—like airline tickets, tour or cruise costs and hotel reservations—should a wrench get thrown into your plans. 

The trip cancellation component covers you if you have to forgo your trip altogether, in which case you're typically entitled to a full refund—as long as your travels were affected by a “covered reason,” as stated in your policy. Trip interruption is when you start your trip, but have to cut it short. In that case, the insurer will cover only the part of the trip that you had to forgo. 

Issues that are typically covered by these policies include the following, although you should always check the specific language in your policy:

• An illness or severe injury that affects you or a member or your traveling party

• The illness of a family member back home

• A death in the family

• Severe weather a natural disaster at your destination

• Jury duty

• An airline or tour company going out of business

The odds of an event like this throwing off your plans may be fairly remote. You could roll the dice, and decide to take your lumps if you need to cancel a flight or hotel stay. But those expenditures can be steep, especially for international travel. So you have to weigh the price of insurance against the potential cost of shouldering those costs yourself.

Trip delay

Finally, trip delay protection pays you back for certain expenses, like meals and hotel stays, if your trip is unexpectedly delayed. That can happen for any number of reasons—if there’s bad weather that slows down airport traffic or a mechanical issue that pushes back the takeoff time. 

Most major insurers will reimburse you for the additional costs you incur, up to a certain per-trip and per-day limit. It’s usually included with comprehensive travel insurance plans. And because it’s usually a smaller benefit than trip cancellation or interruption, trip delay protection only adds a small amount to the cost of insuring your getaway. 

Emergency medical

Suffering a serious illness or injury while you’re on an overseas trip is a scary scenario, particularly when you think about the potential costs of medical care in a foreign country. 

The medical insurance you already have may cover emergency care overseas, but it likely has lower coverage limits than you’re used to. Plus, you may have to pay costs upfront and request reimbursement from the insurance carrier later on. For older travelers, Medicare doesn’t provide benefits when you go abroad, so you may want to seriously consider getting some protection through a travel policy. 

Keep in mind that there are two types of coverage that these plans may provide. Primary medical insurance covers health care costs—and, typically, emergency evacuation to an appropriate medical facility—even if your regular medical plan doesn’t protect you in another country. But even if you do have some coverage through your existing plan, you may want secondary insurance that will reimburse the portion of your bill—often including deductibles and co-pays—that your primary insurance policy doesn’t cover. 

In many cases, travel medical coverage will cover you if you have a pre-existing condition that impacts you during your travels. However, you’ll want to check with the insurance provider; each one has its own stipulations, so you don’t want to make any assumptions. 

Baggage damage or loss

There’s nothing quite as frustrating as making it to your destination city, only to find out that your suitcase and its contents have gotten crushed—or worse, lost in transit. Baggage insurance provides a safety net, reimbursing you for the damage, loss or theft of your baggage and personal effects like clothing and electronic devices. 

Most policies require you to report the incident to the airline or other relevant party first, and pay for any losses that the transportation provider doesn’t cover. Certain per-item limits generally apply, and there’s ordinarily a cap on the overall damages the insurer will pay out to each individual. 

Theft

Some of the most popular tourist destinations in the world are also hotspots for theft and pickpockets. The idea of replacing valuable items, from smartphones and laptops to cameras and jewelry, can be a scary one.

Travel policies often have a benefit that helps cover the cost should you fall victim to theft when you’re on a trip. They may also help you replace missing travel documents that you’ll need to continue your trip or get back home. 

Usually, travel insurance won’t reimburse you for the full replacement value of the item you had stolen. For example, the travel insurer Allianz pays the cost to replace your stolen items, minus a 10% reduction for each year you owned it (up to the maximum 50% reduction). But that’s certainly better than shoulding the whole cost yourself. 

Most standard homeowners policies already include coverage for personal property that’s stolen anywhere in the world—you can check the “off-premises personal property” coverage under the “Coverage C” section of your policy. But beware: It may only cover a small percentage of the item’s replacement value—often 10%. So if you’re planning to travel with expensive belongings in tow, you may want to consider the extra protection that travel insurance provides.

‘Cancel for any reason’ coverage

"Cancel for any reason" (CFAR) coverage is just as the name implies—allowing you to cancel your trip, virtually without restriction—as long as you do so at least two days before you depart. Often, you also have to obtain your policy within 21 days of paying for your airline ticket or hotel. 

Naturally, CFAR can give you significant peace of mind if you’re navigating a complex situation or you’re an anxious traveler that might just find an excuse to back out before embarking on your journey. But it does come at a rather steep price, usually increasing the amount of your coverage by about 40% to 50%. And most CFAR benefits only reimburse you for 50% to 75% of your trip’s cost, not the entire amount. 

How much does travel insurance cost?

The more popular travel insurance companies offer different tiers with varying levels of protection. You guessed it: The pricier the plan you choose, the higher the coverage limits they provide. And you often need a mid- or upper-tier plan to get “cancel for any reason” thrown in. 

We found that the cost can vary considerably, based on what insurer and plan you choose. We sought quotes from three of the biggest names in the industry—Travel Guard, Travelex and Allianz—and found that the cost for a comprehensive travel package can range from around 3% to as much as 8% of the total pre-purchased expenses associated with a trip. 

For example, we sought quotes for an 8-day trip to Italy for one traveler who paid $4,000 total for airfare and hotel stays. The cost of a plan ranged from:

• Travel Guard: $142-$265

• Travelex: $130-$176

• Allianz: $176-$313

In this case, Travelex came in cheaper than the competitors. But that doesn’t always mean you’re getting the same coverage as you’d get from a competitor. For example, you need to select Travelex’s top package to get certain benefits, including “cancel for any reason” coverage, thrown in. So be sure to look at what you’re actually getting, rather than letting price alone dictate your choice. 

Do you need travel insurance?

For the majority of international travelers, having some coverage in place is a smart way to avoid a financial disaster should something go wrong on your trip. Often, the real question is how much protection you actually need.

While an all-in-one policy can make sense for certain travelers, you can save a sizable chunk of change by purchasing travel insurance a la carte. Depending on your situation, you may not need the full gamut of benefits that you’d get with an umbrella policy. 

If you have a travel-focused or premium credit card, for example, you may already qualify for benefits like baggage loss and trip interruption coverage. In that case, you may only want medical coverage that’ll cost you a good deal less. 

Companies like IMG, Cigna Global and BlueCross BlueShield offer medical-only plans that cost as little as $2.50-$3.50 per day, per traveler—although the exact price depends on your deductible, coverage limits and whether you want the policy to cover pre-existing conditions. 

The upshot

The chances are that you won’t need to seek reimbursement from your travel insurance company when you go overseas. But you should ask yourself whether you’d be able to take on the costs of, say, a travel interruption or medical emergency if life throws you a curveball. If the answer is no, decide which types of coverage you truly need and shop around to make sure you’re getting a good deal.