How Does Travel Insurance Work?

Independent policies offer various levels of coverage, but many travel cards also come with some insurance.
Sep 8, 2022

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While every traveler hopes for the best when going on a trip, it's possible for unexpected outcomes to ruin some or all of your vacation. Travel insurance helps in those unfortunate situations by covering the necessary expenses to get you back on the right track.

But how does travel insurance work, how do you buy coverage, and is it a good idea for your next trip? Let’s find out.

What is travel insurance?

Travel insurance protects against financial losses and other risks from unexpected events that occur when traveling. Policies cover the expenses and inconveniences incurred from delayed flights, canceled reservations, lost or delayed luggage, injuries and illness.

You can buy policies that cover one reservation, an entire trip or a specific period of time. Policies can provide protection for a single person or a whole family. Prices vary based on your age, protected items, coverage limits and duration of coverage.

You don’t always have to buy a policy out-of-pocket, though. Some travel cards include built-in travel insurance as a perk. Keep in mind, however, that these policies and their coverage limits vary widely, so it pays to be mindful of what’s covered by any given travel card.

Types of travel insurance coverage

Now that we know what it is, how does trip insurance work? There are many types of policies and coverage levels available, depending on your budget and what risks you want to cover.

So what is travel insurance for? Typically it will cover some or all of the following situations:

  • Trip delay. If your flight or other transportation has delays, you’ll receive compensation to cover food, lodging and other related expenses.

  • Trip interruption/cancellation. When your trip is interrupted or canceled for a covered reason, it provides financial assistance to make other arrangements to continue your trip or go home early.

  • Baggage delay. Covers the cost of reasonable clothing, toiletries, medication and other necessary items until your bag arrives.

  • Lost or damaged baggage. Pays to replace lost or damaged items, including both the luggage itself and personal effects that were in the luggage.

  • Rental car damage. Commonly called an auto collision damage waiver, this covers the cost to repair or replace a damaged or stolen rental car. Some policies also cover the lost income of the rental to the car agency while it’s being repaired.

  • Injury or sickness. If you get injured or sick during your trip, this benefit pays for necessary medical care. Depending on the coverage you choose, this benefit may be primary or secondary to your existing medical insurance.

  • Emergency assistance and transportation. Pays to transport you to the nearest facility that offers adequate medical care to treat your illness or injury. In some cases, this may mean transporting you back to your home country.

Keep in mind that many travel insurance policies do not provide protection for COVID-related situations or pre-existing medical conditions.

How to use your travel insurance

Travel insurance works like most insurance policies. You purchase coverage for a period of time to protect against certain risks. When a covered event occurs, you file a claim with the insurance company to request payment or reimbursement for financial losses.

In most cases, travel insurance covers only prepaid or non-cancelable reservations. If you are able to cancel your reservations for a full refund, you should cancel them directly with that company as soon as possible. Additionally, most travel insurance policies do not cover reservations booked with airline miles or hotel points.

When you submit a claim, you’ll need to provide documentation for your loss. For example, you should document the cause of the issue (e.g., flight delay or cancellation) and provide copies of your receipts to substantiate your claims. Since there are many different types of losses that could occur, your claims process may vary by company and type of loss.

How to get travel insurance coverage

For travelers interested in getting a travel insurance policy, there are three primary ways to obtain coverage — purchase a standalone policy, use travel card benefits, or add on coverage when booking a trip.

Purchase a travel insurance policy

Many companies sell travel insurance as standalone policies that vary in length from a single trip to a full year. Your policy can cover a single person or an entire family. Policies range from those that offer basic coverage to others that are very robust and cover almost every possibility. Coverage options start from around $20 per trip.

For frequent travelers, it may make sense to purchase a full year of coverage instead of buying a policy for each individual trip.

Access via travel card benefits

Many travel cards include protections that cover issues with your flight, bags and other aspects of your trip. These protections are included at no extra charge, and their coverage levels vary from card to card. You may have travel protections from some of the travel cards that are already in your wallet.

Here's a sample of the coverage available from some popular cards:

Trip delay

Up to $500 per ticket after 12 hours.

Up to $500 per trip after 6 hours.

Up to $500 per ticket after 6 hours.

Trip cancellation / interruption

Up to $10,000 per person and $20,000 per trip.

Up to $10,000 per covered trip and $20,000 per card per consecutive 12-month period.

Up to $2,000 per person.

Lost / damaged luggage

Up to $3,000 per person.

Up to $2,000 per bag and $3,000 per trip.

Up to $3,000 per trip.

Baggage delay

Up to $100 per day for five days after six hours.

N/A.

N/A.

Emergency evacuation

N/A.

Complimentary.

N/A.

Auto rental CDW

Primary coverage, up to cash value of vehicle.

Secondary coverage.

Primary coverage, up to $75,000.

Terms apply.

Get add-on protection for your trip

Some companies offer travelers the option of purchasing insurance when booking a trip. However, they are generally limited in nature and usually cover only that specific reservation.

Below is an example of an add-on policy proposed by Delta Air Lines for a flight from Los Angeles to Salt Lake City for a refundable, first-class fare.

In most situations, these add-on policies only make sense for a large financial commitment, such as a cruise or a premium cabin flight. Even then, you should compare how the add-on insurance works versus buying a general policy that could cover your entire trip.

If you’re interested in buying travel insurance

Now that we've answered "how does travel insurance work," you can see how it can be a smart way to protect your trip in case an unexpected problem occurs. Coverage limits and benefits vary by company and budget, so shop around for the best deal. Review your travel card benefits to ensure that you’re not paying for coverage that you’re already getting for free. And, if you have a claim, document everything and compile your receipts to request reimbursement right away.


How to maximize your rewards

You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2022, including those best for:

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