Travel insurance: not just for worrywarts anymore

It stinks when canceled flights derail vacation plans. The only thing worse might be getting sick or injured once you arrive.

Travel insurance is an increasingly popular, relatively low cost way to protect your vacation from bad weather (and badly run airlines) as well as protect your savings from costs associated with broken bones, heart attacks, strokes and medical transport back to the U.S. for treatment.

Before the pandemic, travel insurance was a sleepy market primarily for obsessive worrywarts. Then COVID-19 wreaked havoc on flight schedules, health and travel plans. As more travelers grew weary of airline disruptions—and as older people resumed international travel—the travel insurance market suddenly took off, with sales soaring 17.3%, to $22.4 billion, from 2022 to 2023.¹

“Many people began protecting the hard work and investment they had in their travel plans,” said Evan Potash, a TIAA executive wealth management advisor. “It helped keep them sane through all of the moving parts of travel.”

What is the product exactly? And should you purchase it for your next trip? Below are answers to common travel insurance questions.

What is travel insurance? Travel insurance policies are short-term, customizable insurance policies that offer protection against two main travel pain points: disruptions (flights, lodging, rental cars, etc.) and medical emergencies while traveling. Travel insurance lives in the space between the coverage gaps left by medical insurers, credit cards, airlines and your peace of mind.

Why get travel insurance if I have credit card protection and medical insurance already? For travel disruptions, airlines may make some allowances for canceled flights and for delayed, lost or damaged luggage. They might even make the rare reimbursement for lodging. But such offers of compensation are inconsistent, contentious and often insufficient. The best travel credit cards offer remuneration for lost luggage, for some canceled and interrupted flights, and for auto rental collision damage. Potash, the TIAA wealth management advisor, advises people to read the small print of your credit card’s guide to benefits (which can be found online) to see what’s covered and not covered. “It’s all about knowing what the exclusions are,” he said. Websites such as NerdWallet and The Points Guy are two useful resources for travel-related credit card information, as is your card issuer.

What about medical emergencies while traveling? If you’re traveling within the United States and your health insurance plan has a wide network of in-network providers and facilities, then you probably don’t need travel insurance for medical reasons. Consult your existing insurance plan for details. Many private insurance policies only work in the United States, however, leaving travelers abroad on the hook for medical costs. Also, don’t expect any help from Medicare and Medicaid, which do not cover any health-related costs outside of the United States.²

Who should consider getting medical travel insurance? There are two big variables—your travel destination and your health status. Travelers visiting overseas locales where medical services are distant, insufficient or antiquated might consider travel insurance even if they’re young and healthy. Without insurance, the cost of an emergency transport to the nearest modern hospital could be financially overwhelming. Health status is the other key variable. Travelers with health liabilities or pre-existing conditions—compromised immune systems, severe food allergies, heart issues, a history of strokes and osteoporosis, for example—are more likely to experience a costly emergency. Treating these as out-of-pocket expenses could cause significant financial stress.

How much does it cost? Expect to pay 4% to 8% of your overall trip cost, according to a 2023 study by the U.S. Travel Insurance Association.³

So, a $5,000 trip abroad will run $200 to $400 in travel insurance on average. Ultimately, the factors that determine the price are destination, the length of the trip, the type of coverage, the total trip cost and your age. The coverage for an 80-year-old hiking in Patagonia will cost more than that of a 45-year-old on a culinary trip to Greece.

To shop for travel insurance, first know your destination, travel duration, what your credit card benefits are and what your health insurance policy may already provide. Decide what is uncovered or insufficiently covered. Then compare quotes from reputable insurers online for your coverage level. As Potash advises, remember to look for the exclusions to any policy.

Tips for considering travel insurance

• Do your research ahead of time. What is your destination? Where is the closest hospital with a suitable reputation? How long are you going to be there? What are your foreseeable risks?
• Find a description of benefits from your medical insurance company and credit card company, either by calling them or checking their websites. (Remember that your credit card benefits only apply to the services you used the card for.)
• Read and understand what’s covered and not covered —the exclusions. Determine the gaps in your credit card and medical insurance coverage.
• Get quotes from at least two travel insurance providers for only the coverage you need.
• Select a known company with good credit ratings. Claims-paying ability is tied to credit ratings.