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How to Avoid Travel-Insurance Gotchas

If you’re planning a big summer trip, chances are you’re at least considering travel insurance. Travel insurance can either be a great idea—or a waste of money if you encounter a gotcha or two. Fortunately, you can avoid most gotchas if you buy and act carefully.

Preexisting Conditions: As with health insurance, preexisting conditions can become a major gotcha for both trip-cancellation/interruption insurance and medical insurance. As Quotewright’s John Cook notes, preexisting conditions “will again quite likely be the number-one travel-insurance issue for 2015.” And that’s an easy issue to dodge if you follow the specific requirements of each policy.

Most travel-insurance policies specifically exclude preexisting medical conditions as “covered reasons” for canceling or interrupting a trip and for covering a medical claim. But most insurance companies specifically waive that exclusion provided you buy the insurance within a specified period after you make your first prepayment for the trip. The waiver period is generally a week, 10 days, or two weeks, but a few companies extend it to as much as 30 days. A waiver for the exclusion for preexisting conditions does not add a penny to the cost of the insurance; it’s just something you have to do soon after you start arranging your trip. But policies vary a bit in the way they treat prepayments:

  • With any policy, you must be physically able to travel on the day you buy the insurance. You can’t buy insurance if you’re unable to travel at the time but expect to get better by the time you’re supposed to leave. This limitation applies to any traveler in a family or group covered by the insurance.
  • You must insure the “full value” of the trip. But this requirement is a bit tricky. With some policies, this means the total cost including refundable components that you can recover or reuse. With others, you must cover only the nonrefundable components of your trip. In any case, the policy may not allow you to cover only a portion of the value; you can’t “round down” the trip cost to squeeze in under a lower insurance price bracket.
  • If you add additional nonrefundable payments later, you must increase the value of coverage, typically within 21 days of the added prepayments.

In any case, most policies clearly cover only “unforeseen” circumstances—even those that would normally be considered “covered reasons.”

Secondary Coverage: Almost all cancellation/interruption policies and many medical policies provide only secondary coverage. That means cancellation/interruption insurance will cover only those prepayments that you can’t first recover from the primary supplier—airline, cruise line, resort, or tour operator. And secondary medical insurance will cover only what you can’t first recover from your regular health insurance. Moreover, some secondary medical insurance requires that you pay up front for whatever out-of-pocket medical expenses you encounter while traveling and subsequently ask your regular health insurance for reimbursement. That’s probably not a problem for a quick doctor visit, but if you have to be hospitalized, paying the bill could amount to a big hit on your checking account or credit card.

No Improvising: Many travel-insurance policies cover on-site medical expenses, as well as early return home. But to take advantage of the policy’s coverage, you have to follow the fine print. And that almost always means going through the insurance company’s designated representative before you take on any initiative of your own. If you decide to return home early, for example, don’t just go out and buy a new airline ticket or charter a business jet. Instead, inform the insurance representative, who may say, “Let me take care of that,” rather than authorizing you to go ahead. Money you spend without authorization may not ever be reimbursed.

Because of differences in the fine print, my recommendation is that you compare policies carefully and don’t blindly take whatever your airline, cruise line, or tour operator suggests. Most of the big online travel-insurance agencies publish elaborate side-by-side comparisons of different policies, including G1G, InsureMyTrip, QuoteWright, SquareMouth, Total Travel Insurance, Travel Insurance Center, and TripInsuranceStore.com.

Ed Perkins on Travel is copyright (c) 2015 Tribune Media Services, Inc.

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