How Does Travel Insurance Work?

Have you ever planned a vacation and tried to understand HOW third party travel insurance works?

Yes, me too. Third party travel insurance is complex.
Let’s walk through the basics and some of the different coverage types and get a more general sense of how travel insurance works. 

Every State Has Completely Different Policies, Coverages, Terms And Conditions

Travel advisors are not licensed insurance brokers, so legally we cannot review each and every coverage offered by the travel insurance plan with you.  
Why so?  
Depending on the state you are a resident of, the coverages can be completely different due to state insurance laws
Again, travel advisors are NOT licensed insurance brokers, therefore you, the client, must speak to the travel insurance provider for any policy-specific questions.  We can give you a general sense of where to find the coverage details and coverage limits, but you must speak with the insurance carrier directly for policy-specific questions.  
Travel insurance coverage varies greatly between states in the US. A great example of this is, ‘Cancel For Any Reason’ is not usually offered to residents of New York State. It tends to be called, ‘Cancel For Any Fortuitous Reason’ in the policy details. This is interpreted as cancel for any ‘unforseen’ reason, not ‘cancel for ANY reason’.  Catch my drift? It’s always best practice to speak to the insurance experts directly with the insurance carrier. 
Given this, if you ever request a travel insurance quote from Nicks Easy Travel for your next vacation and you need specific answers on the coverages provided, you must ask the travel insurance provider directly.  Nicks Easy Travel will not be held liable for specific clauses or changes in insurance coverages  The most restrictive states regarding travel insurance laws and policies tend to be New York, Michigan and Hawaii. 

The 2 Main Types Of Travel Insurance Coverage:

Pre-Departure and Post-Departure 


Pre-departure coverage affects all of your travel reservations made PRIOR to you actually beginning your trip. This is usually called ‘Trip Cancellation’ coverage in the policy details. 
If you meet the criteria for trip cancellation, as outlined with the travel insurance carrier, you could be eligible for up to 100% reimbursement of your non-refundable trip costs if you cancel for an eligible reason BEFORE your trip starts.  Typically this is 100% of your trip expenses. Keywords… Eligible reason AND before your trip starts!
Keep this in mind and always ask the travel insurance provider directly if you are confused what this means! Most insurance plans have a requirement that you cancel AT LEAST a certain amount of hours OR days before your trip begins.
What typically constitutes ‘before’ your trip starts? Before your outbound flight departs, before your cruise ship is scheduled to embark, before you pick up your rental car or check-in at your hotel.
When can you use ‘Trip Cancellation’ coverage?  All travel insurance plans have criteria you must meet in order to use this coverage. For example: a death or unexpected illness with you, your travel companion(s) or an immediate family member.
A good example of this could be that you or your traveling companion(s) fall and break their leg or have a massive heart attack a week before you’re supposed to fly to your vacation in Key West. Typically, if you file a claim with your travel insurance and cancel your trip, you would receive up to 100% of your non-refundable trip costs since this would be considered an ‘unexpected illness’ and it occurred PRIOR to your trip starting.


COVID19 and Travel Insurance:

Worth mentioning, the COVID19 pandemic has dramatically changed travel insurance benefits and coverage. You need to verify what policies and coverages are in place during a pandemic. You also need to verify if the plan will cover you in the event you become diagnosed with COVID19 before or during your travels. Every company has different policies on this. Please do your due diligence and speak to the insurance company directly as the situation remains fluid.

Cancel For Any Reason (CFAR) Coverage:

One of the best travel advisor tips and secrets is adding ‘Cancel For Any Reason’ coverage to your travel insurance policy.  Some travel insurance plans offered this before the COVID19 pandemic, however most plans have discontinued this coverage and it can not be added onto your policy.  This is extra coverage you can add-on to your policy to essentially allow you to cancel your trip for any reason prior to your trip starting. This could be because you had a bad hair day or just don’t feel like traveling at the moment.
There are always terms and conditions to use this. Nicks Easy Travel 100% recommends you call and speak to the insurance provider directly and ask if their CFAR coverage is truly a ‘Cancel For Any Reason’.  Make sure to verify with the insurance company what state you are a resident of as well, as the state you reside in can significantly affect the policy and coverage, as mentioned above.
As a rule of thumb, you’ll find most Cancel For Any Reason policies reimburse up to 75% of the non-refundable trip costs. This can vary from company to company.
The only travel insurance company I know of that is still offering Cancel For Any Reason (CFAR) coverage as of this writing is Travel Safe.  You can find a link to their website to generate a quote here.


Cancel For Work Reason

Some insurance plans include Cancel For Work Reason for free and others charge extra.  Typically, if you purchase your travel insurance policy within a few weeks of your first deposit date of your trip, this can be added on or may be automatically added on.  Essentially this allows you to cancel your trip due to work obligations requiring you to be present at work.  Always read the fine print and call the insurance provider and verify the terms and conditions of how this coverage can be used.

Trip Cancellation Due To Financial Default

Financial default, while rare, is when a vendor or supplier goes out of business due to being financially insolvent.  This can result in your reservations being cancelled or no longer honored with the cruise lines, hotels or tour operators. This trip cancellation due to financial default coverage may reimburse you the costs of your trip in the event the vendor or supplier goes out of business.  
Always check with your insurance plan directly if this is automatically included in your policy or if it requires an additional cost. 

Post-Departure Coverage: Trip Interruption and Delayed Arrival

Now this gets into the nitty gritty and more specific terms and conditions and coverage limits. In all honesty, you will need to speak to the travel insurance provider to clarify each of these coverages.
Trip interruption coverage typically reimburses you for costs if you must start your trip later than originally scheduled departure. For example: you miss your flight to Miami to catch your cruise ship because a family member had an unforeseen illness or death. But you plan to rejoin the cruise at the next port of call. This coverage will typically reimburse for the ‘interrupted’ portion of your travels and cover a portion of your total trip cost or will reimburse you for the costs incurred due to late arrival. 
Some policies will also provide coverage under this benefit if you have scheduled jury duty!  Always call and speak to the insurance company to understand what their restrictions are.


Post-Departure Coverage: Trip Delay

Trip delay coverage typically reimburses for extra hotel nights, meals and transportation costs if you are delayed for a certain number of hours while en route to or from your trip due to some kind of ‘travel hazard’.  Examples of  ‘travel hazards’ are car accidents en route to your departure, lost or stolen passports or a road closure due to severe weather.
Each insurance company has different limits for the minimum number of hours AND the amount they will reimburse for. Make sure you understand these limits and if documentation is required for reimbursement.

Post-Departure Coverage: Missed Connection

If you are delayed more than a certain number of hours upon arrival to your destination, you may be reimbursed for additional transportation costs to join the original departed trip and other costs.  This gets very tricky with the wording of the policy, so you must call the insurance and ask how this coverage works under different scenarios.  Write down all of your questions and scenarios and document how the policy will work given these situations. 


Post-Departure Coverage: Emergency Accident and Sickness Medical Expense

This is one of the MOST important coverages to review when comparing travel insurance policies. Emergency medical coverage is the amount the policy will reimburse if you have an emergency situation that arises and need medical attention.  This typically covers the cost for a physician to treat you, x-rays, laboratory exams, etc,.   For example: you suffer a stroke or heart attack and need emergency medical attention at a hospital, this coverage should pay the facility directly to treat you for the emergency.
I highly recommend you buy a policy that has Primary Medical Coverage. Some travel insurance plans, like Roam Right’s Pro Plus plan, offer this automatically. This will alleviate many headaches since the travel insurance can pay the medical facilities directly without using your primary medical insurance back home in the US first.
Some policies offer a minimum of $25,000 per person. To be truthful, I always recommend at least $50,000 or higher. $100,000 per person or higher is a better choice, in my opinion, and typically only costs a few dollars extra per person on the policy. 


Post-Departure Coverage:  Emergency Evacuation and Repatriation of Remains

This is the second most important coverage you need to review and understand.  Emergency evacuation coverage is used to reimburse the cost to transport you to the nearest medical facility capable of treating you for your emergency.  If you are on a Caribbean cruise, for example, this will typically cover the helicopter med-evac ride to transport you back to Miami or another facility. Keep in mind, helicopter rides are NOT low cost. On average, you can expect $25,000 up to well over $125,000 per person.  My advice is to choose a policy that has $250,000 - $500,000 emergency evacuation coverage at a minimum.
Repatriation coverage is the cost associated with transporting your remains back to your home country in the event you die while traveling.


Delayed, Lost and Stolen Baggage

You’ll always see extra coverage in the policy for delayed, lost or stolen baggage.  Make sure you ask the insurance company if you need to provide photo documentation of the items in your baggage. It is a smart idea to take pictures of all your items you are traveling with prior to departure. You may need to submit these to the insurance provider for reimbursement.


No Charge For Children On Policy With Parents

One of my favorite choices for travel insurance is Roam Right. Their Pro Plus plan, at the time of writing this, covers 1 child under age 18 with each covered adult. So if mom and dad are traveling with their two children under age 18, there is no charge on the premium for the kids. Check with your plan to see if this is offered as it may reduce your costs dramatically.

Pre-Existing Medical Conditions

Most travel insurance plans will not cover medical treatment if related to a pre-existing health condition.  To make this simpler to understand, for example, if you have uncontrolled diabetes and are at a resort in Cancun and suddenly you need medical treatment for an episode of low blood sugar, the travel insurance plan may not cover the costs related to treating this because diabetes was a pre-existing condition.
One very important detail to keep in mind is most travel insurance plans have a ‘free look back period’ where they will not take into account any pre-existing conditions you are actively being treated for in a specific period of time, for example, the last 14 days.  Make sure you purchase your travel insurance the same day as you pay the deposit for your trip as some insurance plans offer a more generous look back period for pre-existing conditions.


Miscellaneous Coverage

Most plans may offer a Political and Security Evacuation Coverage. This may provide cost of transportation to have you evacuated from a region that is deemed a political or security event.
You’ll find most insurance plans offer additional coverage or waiver for rental car damage and also high-risk or dangerous sports like rock climbing, skydiving and scuba diving, to name a few. You can usually add these extra coverages if you feel they are necessary. Check to see if you actually need these as you may not be renting a vehicle or participating in dangerous sports on your next trip.
Lastly, I always recommend buying a travel insurance plan that offers a worldwide travel assistance program. Roam Right offers this with their Pro Plus plan, as of this writing, at no extra charge. This will come in handy especially if you don’t speak the local language in the country you are traveling to. 
A few of the services they may offer are destination profiles, which are health and safety risks of cities of regions, immunization recommendations, local hospitals, emergency phone numbers, culture, transportation information, as well as exit and entry requirements by each country.  They also may offer assistance with replacing lost or stolen travel documents and passports, emergency airline and hotel reservations, emergency cash advance, licensed attorneys, language services and replacement of corrective lenses and medical devices. This may become super handy if you really need it!
Phew…! This was a long one!

Let’s review the most important things you need to know about how travel insurance works.

  1. Always call the insurance company directly and ask how the different coverages work with the state that you are a legal resident of or reside in. Different states have completely different insurance laws. It’s like comparing an apple to an orange!  
  2. Never ask your travel advisor how to interpret specific coverages, policies or terms and conditions of your travel insurance plan. We are NOT licensed insurance brokers and thus cannot legally answer these policy-specific questions. You must ask the insurance company directly.
  3. Emergency medical coverage and Emergency medical evacuation coverage are the two most important coverages you need to worry about. I always recommend choosing the highest limits you can afford. A helicopter medical-evacuation can run over $100,000. You will never be sorry you bought more coverage than you needed. 
  4. An easy way to compare different travel insurance plans apples-to-apples is by comparing the Schedule of Benefits and the policy summary page of each plan you’re interested in purchasing.  This is typically the first or second page of the insurance documents or quotes.
  5. Travel insurance is difficult to understand! Don’t ever assume. Always ask for help. Travel advisors are here to do just that… Advise you on what to do! Nicks Easy Travel always recommends purchasing travel insurance or travel protection when traveling domestic or abroad.
I hope you found this article helpful and you understand how 3rd party travel insurance works somewhat better than you did before reading this.
Please share this article with your friends, family and colleagues.  Nicks Easy Travel is always a phone call or email away if you need help with planning or booking your next group trip. Don't forget to ask about travel protection options! 
Did you know? Even if you book a trip directly yourself with a vendor OR with another travel advisor or travel agency, you may still purchase your travel protection from whomever you choose!  Contact Nicks Easy Travel for several travel insurance quotes so you can make the best decision.  Most insurance companies offer lower pricing when booked through Nicks Easy Travel versus the client booking direct on their consumer website.
Please contact Nicks Easy Travel for all your travel questions and quotes! Our contact information is below.
Safe travels!
Nick Stark
Owner and Travel Advisor, Nicks Easy Travel
An Affiliate of Outside Agents/Cruises and Tours Unlimited 

Mobile: 518-955-4027

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Quotes for Roam Right Travel Insurance (Always Choose Pro Plus Plan): 
Travel Safe Insurance: 
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Affiliate link disclosure: Nicks Easy Travel does offer several different travel insurance plans with various companies. If you were to click on the travel insurance links in the article and purchase a travel insurance plan, I will receive commission on the sale.  This does financially support Nicks Easy Travel and allows it to continue operating and serving its customers.