Is travel insurance worth it?

We all have ways of protecting ourselves when we travel. Buying travel-sized hand sanitizer. Studying the hotel evacuation map. Calling your financial institution to make sure your debit card will work. 

Still, things happen. Travel insurance can provide peace of mind on your journey by creating a cushion against misfortune when you’re far from home. Some people swear by it.. But do you really need it? 

Here’s what you need to know about travel insurance: At every step of your journey, people will offer to sell you insurance for all sorts of things. Your airline ticket, your cruise, your luggage — even your rented water skis. Sometimes it’s worth it. Sometimes it’s not. To avoid adding unnecessary costs to your trip, it’s important to understand what travel insurance covers and when it’s a smart idea. 

What travel insurance covers 

There are plenty of things that can go wrong when you travel. You might lose your luggage, get injured or have to cancel your trip entirely. Each of these examples involves a different type of coverage and travel insurance is an umbrella that encompasses them all. A comprehensive travel insurance policy typically costs about 5 percent of your total trip, and it pays out if: 

• Your trip gets canceled, interrupted or delayed. 

• You lose your baggage or personal items. 

• You require emergency medical care abroad. 

• You suffer death or dismemberment. 

What’s important to remember is that not every traveler needs every type of coverage. For example, your health insurance might cover emergency medical expenses in another country, or you may already have a standing life insurance policy. Traveling is expensive enough without paying for redundant coverage. So take stock of what you already have and buy only what you need. For most travelers, that’s trip cancellation insurance. 

What happens if you have to cancel 

When illness or extreme weather throws a wrench in your plans, airlines, cruises and hotels often won’t refund your prepayment or deposit. That’s why this is the most popular type of coverage. 

Trip cancellation insurance can cover up to 100% of prepaid, nonrefundable flights depending on the reason for cancellation. And there is also “cancel for any reason” travel insurance, which offers partial reimbursement as long as you cancel at least 48 hours ahead. Most of the time, you won’t end up needing it. But you never know when events beyond your control might interfere with your travel plans. 

Choosing whether to buy trip cancellation insurance is all about weighing the likelihood of a major hiccup against the cost of your trip. Here are some questions to help guide your decision: 

What are the odds of cancellation? 

Think about where you’re headed and what time of year it will be, and consider whether there are any factors that might raise the odds of a cancellation — like traveling during hurricane season. 

How much of your trip is nonrefundable? 

Airline tickets typically aren’t refundable and hotels may not return your deposit. If you prepay for your booking online, especially through a discount site, there’s a good chance you won’t get a refund if plans go awry and you need to cancel or change your trip. Our advice: Add up how much you stand to lose if your plans go up in smoke and then make a calculated decision on whether travel insurance is worth it. 

How bad would it be to lose those funds? 

The more expensive your vacation, the more you stand to lose if something goes wrong. When you’re on a tight budget, adding travel insurance on top of your other expenses can make it harder to afford your trip — but you might suffer a bigger blow if your plans get canceled. How would losing that money impact your overall financial picture? 

When you’re considering trip cancellation insurance, keep in mind that it probably won’t cover every situation. If you cancel your trip due to a preexisting medical condition, a psychological or nervous disorder, intoxication or because you simply changed your mind, chances are you won’t be able to file a successful claim. Read policy exclusions carefully, and make sure you meet the conditions for coverage.