Travel insurance has quickly become a topic of discussion as families and businesspeople have begun traveling again, but is it right for everyone's budget?
Summer quickly approaching, you could be asking yourself which expenses are worth the investment when planning ahead for your vacations. Especially when it comes to travel insurance, you want to make sure you’re not overpaying for protection that may not be 100 percent necessary. Depending on where you’re traveling and how long you’ll be there, taking a trip can eat up a substantial amount of your budget as it is. Add in travel insurance, and you could quickly acquire more costs than you originally planned.
Allied Market Research reports that the global travel insurance market was valued at $12.38 billion in 2020 and is expected to grow to $119.31 billion by 2030. This rise is in part due to more senior citizens traveling, as well as increased business travel expenses.1 As you might expect, tourism is one of the key factors contributing to this rise. According to The World Tourism Organization (UNWTO), there was a 4% rise in global international tourist arrivals in 2021.2
As you plan ahead for your summer vacations, there are a variety of factors you should consider before investing in a travel insurance policy. While protection is never a bad thing, you want to make sure the value of the coverage outweighs the added cost. For people on a tight budget, travel insurance may not be worth the financial stress involved. However, when it comes to longer and more expensive vacations, travel insurance could quickly prove to be a beneficial use of your money.
When to Consider Travel Insurance
One of the most common reasons you might want to invest in some travel insurance is if you’re taking an expensive vacation that includes non-refundable fees, such as your flight, hotel and transportation. While your credit card might reimburse you for a portion of these expenses, you could easily incur costs beyond its limit. Even if your chosen travel provider offers a reimbursement policy, it may not be as lenient and flexible as what you might get with a travel insurance policy. Travel insurance could reimburse you for a myriad of reasons, including unexpected work requirements, illness and military deployment. Additionally, you may not have a restriction as to when you can cancel your trip, which is not always the case with travel providers.
With more money invested upfront comes more concern about unexpected circumstances or situations inadvertently changing your plans with minimal or no prior notice. Accidents happen, especially when you’re in an unfamiliar place doing activities that you may otherwise not entertain when in your home state. With travel insurance, you’re protecting yourself from thousands of dollars of hospital fees that you could incur in the event that an accident or emergency happens while you’re on vacation. And if you already have a pre-existing condition, travel insurance can help make sure you don’t spend an obscene amount of money if your condition worsens during your time away from home.
When to Skip Travel Insurance
If you’re someone who enjoys taking shorter, weekend-long trips, travel insurance may not be worth it in the long run because the cost of a policy could potentially cost more than the trip itself, or at least add up to an amount beyond your total travel expenses. Especially when it comes to plane tickets and hotel bookings, the airline and hotel you choose may be able to reimburse your expenses if you decide to cancel, or at least offer you a credit so you can take the trip at a later date. It’s important to read the fine print before making these payments in case refunds are limited or non-existent.
For those who have car insurance and a credit card specifically designed for travel, you may already be paying for the protection a travel insurance provider could offer. Instead of paying more money for double the coverage, you could instead maximize the policies you already have.
When exploring your travel insurance options, you’re going to want to purchase a policy sooner rather than later if you want to avoid a higher premium or reduced policy. If you’re unable to pay for coverage within 10 to 15 days of booking your trip, it might be best to avoid travel insurance altogether to reduce additional fees and lower-quality protection.
Evaluate Your Trip Thoroughly Before Committing
While extra protection could provide you with the peace of mind you need to fully enjoy your vacation, depending on the cost of the insurance policy, it may not necessarily be worth your time and investment. Especially if you’re going on a relatively short and inexpensive trip within the states, the amount of money you could lose may end up being less than what you would pay for a travel insurance policy.
With so many providers out there, you want to make sure that if you are going to get travel insurance, you get the coverage that makes the most sense for you. From the location of your trip to potential medical surprises, it’s a good idea to outline your top concerns to determine which policy best suits the needs of both you and your family. For more information on how to stay financially secure enough to ensure that you and your family can take the vacations that you want to, please feel free to contact one of our licensed retirement advisors for easy and worry-free consultation.
By Christian Cordoba
CERTIFIED FINANCIAL PLANNER™
Founder, California Retirement Advisors
Want more summertime saving strategies and tips? Check out these other CRA articles:
Worried About Your Summer Financial Health? Here Are 8 Simple Steps To Put You At Ease! — California Retirement Advisors (cradvisors.com)
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