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Understanding Travel Insurance
A travel insurance primer from TravelInsuranceCenter.com


Introduction

Traveling can be exciting and rewarding, but it can also be expensive when the unexpected occurs far from home such as sickness or injury, travel delay, baggage loss, or worse. In the past decade medical costs have increased dramatically worldwide and even countries with subsidized National Health plans now demand payment in full from foreign visitors for medical services rendered. At the same time travel suppliers such as airlines, and tour operators worldwide have made cancellation policies more restrictive, so if you have to cancel a trip it's likely that a substantial portion of your pre-paid travel expenses will not be refunded, and if you have to interrupt a trip mid-way, a last minute, one-way economy fare return-flight is now likely to be more costly than ever. Moreover, the reality of global terrorism, increased travel industry bankruptcies, global economic instability, and the overall unpredictability of life today causes many people to seek ways to minimize the unique financial risks associated with travel.

As a result, savvy travelers purchase travel insurance in order to protect against the potentially staggering financial costs resulting from crises such as the cancellation of a big trip due to death or illness of a family member or a required emergency medical evacuation.

Basic Plan Types

There are many types of travel insurance and choosing the right plan can be confusing. Becoming familiar with the basic types of plans and the specialized terms will make it easier to compare plans, and ultimately choose the right plan for your needs. WorldTravelCenter.com breaks down travel insurance into five major categories:
  • Accidental Death & Dismemberment (AD&D)
  • Trip Protection
  • International Medical Insurance
  • Annual Medical
  • Emergency Medical Evacuation.


  • Accidental Death & Dismemberment (AD&D) insurance pays the insured or its beneficiary a substantial lump sum benefit when an accident results in death or the loss of a body part. Often people think travel insurance means flight accident insurance. Flight accident insurance is a type of AD&D that pays a benefit only when an airplane accident results in death or the loss of a body part. Common Carrier AD&D is a type of AD&D that pays a benefit only when an accident involving a common carrier results in death or the loss of a body part. Finally, the broadest type of AD&& is 24-Hour AD&D which pays a benefit when any accident results in death or the loss of a body part so long as the accident occurs during a covered trip.

    Accidents due to terrorism may or may not be covered depending on the policy. Acts of war, and nuclear, chemical, and biological attacks are usually excluded, but policies that waive the exclusions can be purchased at a considerable cost.

    Trip Protection Plans typically reimburse your non-reimbursed travel expenses if an emergency (death, sickness, airline strike, travel company bankruptcy, etc.) occurs right before or during your trip causing it to be canceled, interrupted or delayed. Often these plans include travel assistance services, coverage for lost or damaged baggage, as well as minimal coverage for incurred medical expenses. Although the maximum benefit limits for medical expenses may be relatively low, often there is no deductible or co-pay. Usually travel protection plans are sold on a per-trip or single-trip basis but some plans can be purchased on an annual multi-trip. Annual multi-trip travel protection plans offer all of the benefits of single-trip protection plans except annual multi-trip plans almost never cover trip cancellation.

    Travel protection plans offer good protection for international and domestic travel when your trip cost is substantial. The medical expenses coverage can save Americans money when illness or injury occurs while traveling within the US, especially when your primary health insurance coverage is an HMO or PPO. Travel protection plans cover increased "out-of-pocket" expenses that result from higher co-pays and deductibles because you're "out-of-network."

    International Medical Insurance is medical insurance designed to reimburse you for medical expenses incurred when you are traveling or living in a foreign country for two weeks to two years. Maximum policy coverage levels can be substantial enough (more than US$1 million if desired) to cover major medical expenses such as emergency surgery and extended hospital stays. The "American-style" of international medical insurance coverage is subject to the specified deductible (excess in the UK) and co-insurance or co-pay. Plans may include emergency evacuation, reunion, and repatriation benefits, as well as AD&D and travel assistance services. The plans allow you to choose the maximum policy coverage level and deductible, which affects the premiums, giving you more control over costs than is the case with travel protection plans. Some plans are renewable up to a maximum of 24 consecutive months.

    Whereas travel protection plans are often limited to residents of the US or Canada, international medical insurance is available to all nationalities traveling worldwide. Coverage is guaranteed without underwriting, which means all applicants who have paid premiums are automatically covered regardless of medical history. No medical questions are asked. Pre-existing conditions are generally excluded.

    Annual Medical Insurance is annually renewable international medical insurance with higher maximum policy coverage levels (up to US$5 million) and more comprehensive types of coverage (life insurance, higher limits of AD&D, and daily indemnity for hospitalization can be added to coverage for additional premiums). Coverage is appropriate for individual expatriates and their families, as well as employees working abroad, international organizations, missionaries, and others who want annually renewable major medical insurance to serve as their primary medical insurance. Coverage is available to all nationalities living outside their country of citizenship (or home country depending on the plan). Some plans will cover you in your home country as well as everywhere else in the world. Medical questions are asked and may result in applicant being subject to underwriting in which case a policy may or may not be issued depending on the judgment of the underwriter. Pre-existing conditions may be covered up to a maximum limit that is a fraction of the policy maximum.

    Emergency Medical Evacuation protection covers the cost of a transporting a seriously injured or ill person to an adequate medical facility, a hospital near home, or the hospital of their choice, depending on the plan. This coverage is usually included with both international medical insurance and travel protection plans, but unlike baggage insurance and trip cancellation insurance, it is also sold separately. Emergency medical evacuations are always expensive and sufficient coverage is recommended, especially for long-distance trips.

    International Major Medical Insurance is primary medical insurance intended to take the place of a domestic private health insurance policy or national health care system. International Major Medical Insurance plans typically feature:
    • Worldwide coverage
    • Option to renew the policy indefinitely
    • High lifetime policy maximum benefits (up to US$5 million)
    • Choice of deductible (also known as "excess")
    • Comprehensive coverage such as organ transplants, major surgery,
    • Optional Riders (for additional premium) such as life insurance, upgraded AD&D, and daily indemnity for hospitalization
    • Coverage for routine healthcare/wellness, prescription drugs, alternative medicines, mental/nervous care
    • Coverage for maternity, newborns, and child wellness
    • Limited coverage for pre-existing conditions
    Some International Major Medical insurance plans will cover you in the United States and Canada as well as the rest of the world. Some plans exclude coverage in the United States and Canada. For some plans your country of citizenship determines eligibility for coverage in a certain country. For other plans the country where your primary residence is determines eligibility.

    Some plans exclude pre-existing conditions until you have been insured with the plan for a certain period of time. Some plans cover pre-existing conditions if you are currently insured by a US health plan that provides "creditable coverage" or you have been continuously covered by comparable health insurance. Some plans exclude pre-existing conditions regardless. Some plans cover routine healthcare, also known as "wellness" benefits, and some plans offer vision and dental benefits.

    International Life Insurance is usually sold as one-year renewable term life insurance that pays the beneficiary a lump sum upon the death of the insured during the period of coverage (12 months). Five, 10, and even 20 year international term life insurance may also be available in limited circumstances. International Life Insurance plans typically feature a simplified application process requiring the completion of a a detailed medical questionnaire but not requiring a blood test or physical exam. However, benefits are not payable if death is due to a pre-existing condition that manifested within prior five years. Death due to War and Terrorism is usually excluded but an Optional War & Terrorism Rider is often available for additional premium. In most cases coverage is available regardless of the insured's nationality and country of residence. US citizens residing in the US or Canada and citizens of Canada residing in the US or Canada are not eligible.

    Key features of International Life Insurance are:
    • Worldwide coverage (rates are higher for high risk countries)
    • Option to renew the policy annually through age 64
    • High Maximum Benefits - up to US$1,000,000 or higher.


    International Accident Insurance (also known as Accidental Death and Dismemberment or AD&D) is annually renewable insurance that pays a lump sum benefit to the insured's beneficiary in the event of the insured's death or loss of a body part or function due to accident (as opposed to sickness). AD&D is typically less expensive than life insurance and may be purchased in addition to a life insurance policy to substantially increase the benefit payable to the beneficiary if the insured dies as a result of an accident. An Accidental Permanent Total Disability (APTD) benefit may be available for additional premium. Death due to War or Terrorism is usually excluded but an Optional War & Terrorism Rider is often available for additional premium. Coverage for travel to war zones is available for journalists, contractors, and relief workers. Where travel to high risk countries and/or participation in extreme sports or hazardous activities is contemplated, premiums will be adjusted accordingly. In most cases coverage is available regardless of the insured's nationality and country of residence. US citizens residing in the US or Canada and citizens of Canada residing in the US or Canada are not eligible.

    Key features of International Accident Insurance are:
    • Worldwide coverage (rates are higher for high risk countries)
    • Option to renew the policy annually through age 64
    • High Maximum Benefits - up to US$1,000,000 or higher.


    Special Interest Topics

    International Travel

    When planning a trip abroad it is best to find out from your insurance agent or primary health care administrator (i.e., individual or group private medical insurance, HMO, PPO, ministry of health, etc.) whether you are covered for medical expenses incurred while traveling abroad. Many people are surprised to discover that their health care provider offers little or no protection or reimbursement for the costs of any type of medical treatment received in a foreign country. Where this is the case, purchasing adequate international travel insurance is a prudent option.

    Student Travel

    Students studying or traveling abroad should make sure they are aware of what insurance coverage their school or study abroad program provides, if any. Usually travel insurance is not included in a program's fees and is entirely the student's responsibility. When offered insurance always contact a few additional travel insurance providers on the Internet to compare rates and benefits, and call if you have questions. Students with health insurance coverage during the academic year are often not covered during the summer. Moreover, domestic health insurance designed for students will very rarely cover travel abroad.

    Students 26 years old and younger can often find low-cost travel insurance because they are less prone to illness than older travelers, so students should ask about student rates, especially when traveling in a group of five or more when discounts can be substantial. International student ID cards often feature travel assistance services but be aware that this is not insurance and will not reimburse you for medical expenses or extra travel expenses due to delays, lost luggage, etc.

    Group Travel Insurance

    Group travel insurance may be available when at least 5 travelers (usually 10 or more) on the same itinerary apply for travel insurance coverage on one application. To ease the administration most group travel insurance plans are not age-rated which means the plans are the same price for all ages, and dates of birth are not required on the application. Purchasing group travel insurance can result in substantial savings in many cases, particularly for large groups (20 or more travelers), and especially for students and seniors.

    Travel Supplier Bankruptcy/Default

    Many trip protection plans cover lost travel expenses due to travel supplier bankruptcy and default (cessation) of services but there are substantial differences among plans. Some plans provide a list of travel suppliers that can be covered and exclude all others. Some plans require that you purchase the insurance within 7-14 days of paying the initial deposit for your trip. Many plans exclude coverage if the travel supplier that goes bankrupt or defaults is the same travel supplier that provided you with the travel protection plan. Customized "wholesale" plans provided by cruise lines and tour operators directly to travelers never cover bankruptcy or default of the cruise line or tour operator offering the plan.

    Terrorism and War

    After the tragedies of September 11th, 2001 many travel protection plans modified their wordings regarding terrorism. Many plans will cover trip costs in the event of trip cancellation due to terrorism, but wordings differ in important ways so read the clauses carefully and email or call and ask questions if you are confused. Some plans cover terrorism in the US some do not. Some plans cover terrorism near your home city some do not. Generally, if a plan covers trip cancellation due to terrorism you may be eligible for trip cancellation benefits if a terrorist attack occurs in the your destination country or city or a city or country on your itinerary so long as the attack occurred after you purchased the policy and within a specified number of days of your scheduled arrival (often 30 days). Be aware that how terrorism is defined in the policy is important and varies from policy to policy. Pay close attention to the words "City" and "Country" in terrorism clauses.

    Coverage for acts of war as well as nuclear, chemical, and biological attacks is generally excluded from travel insurance plans, but individually underwritten high limit coverage is available (at a high cost) from specialty high-risk insurance underwriters such as Lloyd's of London, to cover medical expenses as well as accidental death & dismemberment, but not trip cancellation.