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Travel Insurance: To Buy or Not To Buy?

Travel insurance can be complicated. Group travel can be complicated. Put them together? Even more complicated. But ultimately, it’s about two things: “protection and peace of mind,” said Scott Adamski, head of U.S. field sales and licensing for AIG Travel.

When it comes to travel insurance, the biggest mistake travelers make is “not selecting coverage or not buying it after their initial deposit,” Adamski said.

Most carriers have an early purchase window for travel insurance policies, usually 10 to 14 days after putting down a deposit on a trip. While most companies sell policies up to 24 hours before departure that cover medical treatment, evacuations and trip interruption during travel, buying the policy early often comes with perks, like AIG’s pre-existing condition waiver that applies to the traveler, the traveler’s companion and people who are not traveling.

Nearly all insurance companies also give consumers a grace period of 10 days or so that allows them to cancel their policy for a full refund, said Daniel Durazo, director of marketing and communications at Allianz Global Assistance. Travelers should use that time to carefully read the policy and fully understand what it does and does not cover.

“I’d say the biggest mistake is that they assume travel insurance will cover absolutely anything that might happen to cause them to cancel their trip,” Durazo said. “It’s important that people read what they’re buying so they understand all the coverage and benefits and how it works.”

To help make sense of the complicated world of group travel insurance, we spoke with several companies that offer coverage in the group market. Here’s an overview of the various kinds of insurance you should consider for your groups.

Trip Cancellation

“The No. 1 reason people buy travel insurance is for trip cancellation protection,” Durazo said.

Trip cancellation coverage varies from company to company, so understanding that portion of the policy is vital. Most policies cover cancellations due to illness of the traveler or family members named in the policy, a death in the family, military or legal obligations, work relocation and more.

Trip cancellation under Seven Corners’ RoundTrip Elite plan has about a dozen covered “triggers,” including one for terrorism. If a terrorist incident occurs in the destination country within three days of departure, you can cancel your trip, said Justin Tysdal, CEO of Seven Corners, a travel insurance company based in Carmel, Indiana.

Collette has been offering Travel Protection plans for more than 20 years, and “ours is unique in the industry,” said Jeff Roy, executive vice president of revenue management and pricing for Collette. “It’s a combination cancellation waiver and on-tour insurance product.”

On average, Collette tours run $8,000 to $10,000 per couple and last 10 days to a month. Travelers typically purchase their trips eight to 12 months before they travel, a big window with a lot of opportunity for things to go wrong.

“Like any purchase, if you buy a car, you want to insure it; if you buy a house, you want to insure it; if you spend $10,000 on a trip, you want to insure it,” Roy said.

Collette’s Travel Protection plans have two parts: Part A is trip cancellation, which is completely held by Collette; Part B is the underwritten insurance policy that provides medical coverage and other protections during travel.

Collette travelers who buy the plan can cancel for any reason they want — “They can say, ‘I’m having a bad hair day,’” Roy said — up to the day before departure. Travelers simply call Collette’s reservation line to cancel and get a full refund in the form of original payment  — not a voucher — minus only the cost of the Travel Protection fee.

“It’s very unique in the industry; most companies don’t do something like this,” he said.

Trip Interruption

Trip interruption steps in to cover incidents that cut a trip short or otherwise disrupt travel. In addition to covering things like natural disasters, Seven Corners’ policies have a political evacuation benefit in case “all the sudden, it turns south, and you need to get out,” Tysdal said.

Collette operates on seven continents, and “there’s all kinds of wacky stuff that happens in the world,” Roy said. Iceland’s volcanic eruption in spring 2010 grounded tens of thousands of flights over the course of a month and stranded millions of passengers. Even if the airline offers a hotel voucher, which it may not, trip interruption coverage can provide travelers $100 a day for food expenses.

AIG Travel’s Travel Guard suite of programs includes Silver, Gold and Platinum plans, all of which include trip cancellation and trip interruption coverage. But in September, the company is rolling out a suite of new a la carte options, such as a “pet bundle” that allows travelers to cancel a trip if their pet becomes ill or dies before departure. Another is the Name Your Own Family option that allows travelers to choose who to list as family members, such as a relationship partner or a close friend — anyone you would want to be with while they’re sick.

“So I could name a person that wasn’t related to me, and they would be treated the same as family,” Adamski said.

Medical Coverage

Domestic travelers typically don’t need emergency medical and emergency transportation coverage because their domestic health insurance plans will cover those services. But “whenever you travel outside the country, you need to have emergency medical and emergency transportation,” Durazo said.

One person who bought an AIG Travel policy had a medical issue out of the country. He spent seven weeks in the hospital there, then got clearance to fly and during the flight out of the country, experienced a different medical emergency.

“We had to get him to another hospital in another country, where he spent another seven weeks,” Adamski said. “That was $400,000.”

Durazo puts it bluntly: “Emergency medical coverage and emergency medical transportation are the ones that could bankrupt you.”

Some people may assume that if they travel to a country with universal health care, they don’t need travel medical insurance, which is not true and could jeopardize them both physically and financially.

As more countries see their health care systems burdened by incoming international tourists who leave without paying their medical bills, more governments are requiring travelers to show proof of medical insurance before they can enter.

Dubai in the United Arab Emirates requires proof of coverage to enter, as does Cuba, which now sells its own form of travel insurance to those who arrive without it. Japan is considering similar policies after it has been left with millions of dollars of unpaid foreigner hospitalizations.

In some countries, hospitals will ask patients to pay their bill before they leave, which could leave travelers scrambling to come up with thousands of dollars.

In addition to covering bills, travel medical insurance provides 24-hour assistance and a medical team that consults with doctors and helps manage the traveler’s care while they’re sick.

“That can be daunting to navigate a health care system in a foreign land where you don’t speak the language,” Durazo said.

The other piece of medical coverage goes beyond financial concerns to emotional ones, Tysdal said. Once, Seven Corners had a woman and a child who were in an auto accident in Eastern Europe. The child was fine, but the woman had to have emergency surgery. Seven Corners booked her husband’s plane ticket and got him to the airport, “but it’s still a 10-hour flight.” The company arranged for someone from the U.S. Embassy to go to the hospital and stay with the child for those 10 hours. Another insurance benefit is the return of a minor child where in a situation such as that one, Seven Corners would handle the arrangements and cover the cost to return a child home.

“Those types of things are probably the most emotional,” Tysdal said. “Things like lost baggage protection and trip interruption are usually more of a financial consideration and an irritation, but the most important are overall health and well-being.”

Medical Evacuation

Emergency medical evacuation may conjure images of daring mountaintop rescues, but it really means emergency medical transportation. And it’s not uncommon.

“We do an evacuation every day,” Durazo said.

A traveler could have a heart attack while in a remote region without good emergency medical facilities, or fall and break a hip during a cruise in rough seas and need to be transported, sometimes by air ambulance, which can cost from $20,000 to $100,000. Air transport companies are not obligated to fly a person from Point A to Point B without payment upfront.

“The air ambulance companies don’t turn on their engines until they have money in hand,” Adamski said.

And, Roy said, even if a traveler doesn’t need to be evacuated per se, but broke a leg in five places and needs to fly home in a roomier first-class seat accompanied by a nurse, Collette’s insurance covers that.

Group Travel

Arguably, a group leader benefits the most from every person in their group having travel insurance, but group leaders can’t require their travelers to buy travel insurance. The group leader can buy a bundle of policies on behalf of their travelers, but each of those policies covers only individual group members. There is no policy available that covers the entire group.

Group leaders and travel providers should offer travel insurance to their customers, encourage them to buy it and explain the benefits of doing so — and also buy coverage for themselves.

“It’s important to offer an insurance option for the group,” Adamski said. “It’s protection for them and peace of mind not only for the travelers but also for the group leader.”

If you’re a travel provider leading a group of 40 people in Europe, and one of them becomes ill or gets injured, what do you do? Do you stay back with them? Do you take on the burden of managing their care, navigating the health care system and relaying information to their family back home?

“You have 39 other people that are planning to have a good experience; we take that burden away from them if they buy the insurance,” Adamski said.

“Group leaders need to understand these things happen, and they happen more frequently with groups,” he said, especially with longer trips or older travelers.

Insurance also improves customer service. If a customer has to cancel a trip at the last minute, “I don’t want to be the one to tell them they can’t get your money back,” Durazo said. “Why would I want to take on that customer service burden when you can offer travel insurance, and the insurance company will give you your money back?”

Both AIG Travel and Allianz Global Assistance work with group tour operators to help them select and offer plans to their customers. Offering these plans also means the travel provider could get an additional revenue stream from fees from offering policies to their customers, Durazo said.

A group plan from Seven Corners can have up to 15 people under a single retail travel medical plan. If the group is larger than that, it will need to register as a census. Still, under that type of group plan, each person has their own individual policy. For a Seven Corners group plan, the purchaser must show how the group members are related to one another. Whether it’s a mission trip, a student group or a sightseeing tour, they need to prove that each member of the group is going on the same trip.

But, if a group leader wants a policy to cover a whole group rather than individual travelers, “that’s not really a travel insurance policy; that’s more of a commercial line of insurance,” Adamski said.

Rachel Carter

Rachel Carter worked as a newspaper reporter for eight years and spent two years as an online news editor before launching her freelance career. She now writes for national meetings magazines and travel trade publications.