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Should You Invest in Travel Insurance?

August 3rd 2016 by
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Is travel insurance worth the extra money?  Some people will tell you it’s a lifesaver, while others will complain what a waste it is. The list of things you can insure is almost endless: airline tickets, cruises, luggage, pets, rental skis, etc.  Since 9/11, the industry has seen growth, making it a billion-dollar-a-year business.  See the instances below to help you determine whether or not it is worth it for your upcoming trip.

Success Story

For one traveler who went to Columbia to build homes for a nonprofit organization, the insurance was worth it when a gold ring he purchased was stolen from him. He submitted the police report to the travel insurance, along with the ring’s receipt.  The travel insurance company sent him a check after calculating the exchange value of this ring.

Horror Story

However, another instance devastated a married couple who had to cancel their trip due to the husband needing spinal surgery. Their insurance wouldn’t refund the $12,133 because the surgery was for a preexisting condition.  Upon contacting a representative for the cruise line, the couple was told they could choose to rebook their trip within a year, or get a transferable voucher to use for a future trip on that same cruise line. Unfortunately, both those options are not likely to work out for the couple.

Where Does the Money Go?

It has been found that many travel insurance companies pay over 50% of their premiums towards claims, but a good chunk goes to commissions, administrative costs, taxes and profit margins. In one example, 25% of a premium went to a commission. That works out to 25 cents of every dollar spent going back to a travel agent or website selling the policy.

Those selling insurance reveal that commissions often make up a significant portion of their income and see it as a win-win: income for the seller and a security measure that can save the customer’s money.  Some annual plans may be worth it to cover the essentials: hospitalization, medical evacuation, trip interruptions and car rentals.  Others, though, may not be worth it, which include policies on rentals such as skis or rental-car insurance that covers more than vehicle damage.

In these circumstances, customers won’t seem to get much out of insurance because it is less likely to cause financial ruin due to the fact that the most you could lose is the replacement cost which could only be a few hundred dollars.


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