Last Updated: July 6, 2009
It's as certain as the sun rising in the East. Every summer you go away on vacation and every year you ask the same question: Should you buy travel insurance for your vacation? Increasingly, the odds of you having to cancel a trip for one reason or another, especially given the presence of swine flu, seem higher and higher. But, is such insurance worth it? Is it a good value for the money?
According to financial planners and others, the answer is increasingly yes, especially when a vacation might be expensive and the risk of losing your money is high. Consider the story of FPA member, Jeffrey M. Garell, CFP®, CLU, of Silversage Advisors. His family traveled to Southeast Asia last summer and purchased travel insurance. "We took it out because, like any other insurance, despite limitations, the few hundred dollars made sense for us," he said. "We had five people traveling, two adults and three children, so if any one person got sick or forced cancellation of our family trip, then of course, we'd have financial backlash with the hotel and airline bookings done through a travel agent. So, given the vagaries of children, plus the sheer number of possible torpedoes to the trip, we paid the few hundred to cover certain items."
Others agree that such insurance is increasingly necessary. For example, Pennsylvania Insurance Commissioner Joel Ario recently reminded consumers to keep a few insurance concerns in mind if planning a trip, renting a property or renting out their own home to vacationers. "Your plans for summer fun could turn into an insurance nightmare if you are not properly covered," he said in a release. "Buying travel insurance is an option that can protect you from the loss of non-refundable travel costs, including airfare, hotel and excursion expenses. Some companies will even bundle packages to include anything from identity theft to delayed or lost baggage, so it's wise to take the time and do a little research to see what's available."
Such policies come with a great deal of fine print and exclusions. Squaremouth.com recently reported that Americans who bought travel insurance hoping to be covered for emergency treatment if they caught the swine flu while on vacation could find that their coverage was limited now that a global flu pandemic is officially underway.
Given that, financial planners suggest that you talk with a financial professional before buying such insurance, a professional who can analyze the fine print and exclusions. In all, planners do see the value of travel insurance, at least in some cases.
"It makes sense to cover the big stuff," said Garell. "In other words, if the policy is reasonable, and you understand the restrictions and coverage, then it's quite like major medical coverage. You're simply transferring the risk of losing the major bookings cost to an insurance carrier. I would definitely consider it for a major trip; one with many travelers; a trip to a region with higher potential of illness, especially if it's a longer trip; and if the loss of the cost of the trip would be difficult for you to absorb, knowing they got no value for the cancelled trip."