insurance

Do you need travel insurance?

What do the Icelandic volcano and the oil spill in the Gulf of Mexico have in common?

Both threw a monkey wrench into individual and group travel plans and sparked renewed interest in the benefits of travel insurance.

"After 9/11, there was a similar surge of interest in travel insurance," says Linda Kundell, spokeswoman for the U.S. Travel Insurance Association in New York. "When you have events of this magnitude, people understandably become more interested."

Travelers with standard trip cancellation insurance policies who were stranded by the eruption of Iceland's Eyjafjallajokull volcano were in luck because most travel insurance plans cover all nonrefundable, prepaid travel expenses for delays or cancellations due to acts of nature. The travel delay portion of a plan can provide $150 to $250 per day for meals and accommodations up to a $1,500 maximum limit, depending on the policy, according to Jim Grace, president of the association.

Man-made events

By contrast, the Deepwater Horizon oil spill is considered a man-made pollution event rather than a natural disaster and thus in contract lingo, is not a "covered peril." While a standard travel-insurance plan typically does not cover cancellation for a man-made event, including acts of terrorism, policyholders whose flight or cruise is delayed or canceled due to the oil slick may be covered under the travel-delay provisions of their policy, according to Kundell.

"Now if the destination becomes uninhabitable, that is often a covered peril," says Kundell. "But if the hotel is functioning but the beach doesn't look good, that doesn't mean that the hotel is uninhabitable."

Confused? Let's break it down. According to the Insurance Information Institute in New York, travel insurance packages typically include coverage for the following: trip cancellation, travel delay, lost-delayed baggage, medical, dental, emergency evacuation, 24-hour traveler assistance and accidental death. Some policies include options for rental car collision and damage coverage.

The cost of travel insurance

The institute estimates the cost of travel insurance at 5 percent to 7 percent of the price of the trip. Thus, a $5,000 Roman holiday would cost roughly $250 to $350 to insure.

You can purchase additional peace of mind with a cancel-for-any-reason policy. Kundell says the upgrade, which typically adds 30 percent to the overall cost of a travel insurance policy, "insures against a greater number of incidents, including 'I don't feel like going.' If you're nervous, this coverage can be a good thing."

Flight insurance, those inexpensive policies underwritten for the airlines by the same companies that offer travel insurance, only insure the air-travel portion of your trip. Such limited coverage may not fully reimburse you should you have to cancel or postpone a nonrefundable flight due to illness, or if the flight is canceled due to weather, according to the travel insurance association study.

Travel insurance not only protects you should illness strike or your tour operator closes down, its medical and 24-hour assistance/evacuation coverage can stave off a potentially catastrophic financial blow should you require emergency assistance aboard a cruise ship or in a foreign country, the study says.

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