TRAVEL INSURANCE TAKES ON NEW
By Peter S. Greenberg, the NBC "Today" Show
One of the new packing essentials since Sept. 11 is travel
insurance. Currently, only about 16 percent of U.S. travelers buy it
each year, but the number is growing rapidly. But what kind to buy? How
much do you want to pay for it? And last but never least, what does it
really cover when youíre away from home? Or sometimes, what does it cover
before you ever leave home?
LETíS START with the bad news: travel insurance can be
the most overpriced of all travel services. But itís an essential investment.
Most travel insurance covers one or two dangers:
- Losses from trip cancellations. Cruise lines, package
tours and airline tickets normally require full payment in advance.
And for cruises and package tours, those payments are often demanded
months in advance. If you are forced to cancel your trip two months
before departure, chances are you wonít pay much of a penalty. But
any cancellation within 60 days could cause you to forfeit your entire
payment. And should you have to cancel your trip during your journey,
you not only lose your money, but the cost of getting you back home
is often your responsibility.
- Emergency medical care and transportation. If you
have an accident or get sick while traveling, getting treatment may
not be enough - you might need to be evacuated to an appropriate medical
facility, perhaps in the U.S. The cost can be astronomical.
So, having said this, what type of coverage do you need?
Well, letís start with some coverage you probably donít need:
- Flight Insurance: Itís got one of
the highest premiums going - and only covers you in the event the plane
crashes. There are 25,000 flights every day in the U.S., and the odds
of a crash are remote. Unless you know something the rest of us donít,
this is an unwise investment.
- Rental-Car Coverage: Chances are
your own automobile insurance policy already covers you. Check your
own policy carefully before buying extra insurance you donít need.
- Baggage-Loss Insurance: Again, chances
are your homeownerís policy, and even some renterís insurance policies,
already cover this.
So, what do you really need?
- Trip-Cancellation or Trip-Interruption Insurance: These
policies reimburse you (or your heirs) in the event you get sick, suffer
an injury, or even die, either before your departure or during your
trip. Many policies will even cover you if that illness, injury, or
death happens to a close family member and prevents you from taking
or continuing your trip. Make sure your policy covers something called
operator default. Without that coverage, your policy may be worthless
if the cruise line fails, the airline goes bankrupt, or the tour operator
liquidates before your scheduled departure. This is important insurance
to have. But in recent months, a number of insurance companies have
stopped selling these policies (precisely because so many companies
have folded), and the companies that still offer the policies now have
frequently changing lists of which cruise lines, tour operators they
wonít cover. In many cases, however, you donít necessarily need
to go out and buy a separate policy. Pay with a credit card! If you
purchase your trip with a major credit card, there is protection
against supplier failure. Under the federal fair credit billing act,
if you purchase a trip and it is cancelled within 60 days of that
purchase and before you leave, you can dispute the charge and the
credit card company is required to issue you a credit. Another
important distinction: weíre talking here about credit cards, not
debit cards. Right after Sept. 11, one cruise line, Renaissance,
folded. Passengers who did not have insurance or who paid for their
cruises with checks lost millions.
- Medical Evacuation and Repatriation Insurance: This
is perhaps the best policy to have. This insurance does exactly what
it sounds like it does. If you get injured or sick while traveling,
the policy pays to have you flown out of the area, and in some cases,
home to the doctor and hospital of your choice. There is a high likelihood
that your own medical insurance only covers you for some emergency
treatment outside the continental U.S. - if it covers you at all. Recently, I was on a
plane with a middle-aged man who had fallen
and broken his hip on a Paris street
corner. In order to fly him home, the commercial
airline required him to buy four first
class seats in order to place his stretcher.
There was an additional cost for the nurse
hired to accompany him. Airfare and other
costs boosted the bill to more than $65,000.
KNOW WHAT YOUíRE BUYING
Some important caveats: There is travel insurance and there is travel protection,
and thereís a big difference. Travel insurance is offered through third party
companies that are licensed and approved by state governments. And travel
protection is offered directly through the individual supplier - the cruise
line or tour operator itself. My choice: travel insurance. Why would you
want "protection" from the very company that might go out of business?
In the event of a bankruptcy or operator default, you are not protected by "protection".
These "protection plans" are designed to protect only the company
and not the consumer. This is especially true with cruise lines. Most have
draconian refund policies for passengers who cancel their cruises within
60 days of scheduled ship departure. And in the wake of Sept. 11, more and
more passengers are buying the trip protection directly from the cruise line
instead of from outside insurance companies. Consider the differences. At
one major cruise line, if you buy the cruise lineís protection program and
have to cancel your cruise, in some cases you only get a credit that you
must use on a future cruise within one year - not a refund.
With medical evacuation insurance, you must read the fine
print very carefully. With some policies, the insurance company retains
the right to make the decision, using its own doctors, as to the extent
of your injury and also makes the decision where the nearest appropriate
medical facility is. With other policies, like Travelguard or Medjet,
the company consults you or your own physician, and will evacuate you
and repatriate you to the doctor and facility of your choice. This is
an extremely important distinction. Both companies maintain 24 hour hotlines
to handle emergencies worldwide.
WHAT IT COSTS
Trip cancellation or interruption insurance roughly costs a minimum of six
percent of what you paid for a trip. And it, like life insurance, is often
charged based on your age. For example, under Travel Guard if your trip costs
$501 to $1000, insurance will run you $46 if youíre under 34, but up to $118
if youíre 85 or older.
Medical Evacuation Insurance: Medjet, for example, costs
roughly $175 a year, and family memberships run $225. A great investment
you hope you never have to use.
Peter S. Greenberg
is the NBC "Today"show Travel Editor.