How to Pick a Travel Insurance Policy

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Travel insurance may make your vacation more expensive in the end, but it could also save you thousands of dollars. Not only can travel insurance reimburse you if your trip is interrupted or canceled for reasons outside your control, but it can cover pricey medical bills, pay for medical evacuation in the event of an emergency, replace lost luggage, and more.

But there are so many different types of travel insurance policies — and so many travel insurance providers — that finding the right policy isn't always easy. You have to choose a company you trust first and foremost, but you also need to find a policy that makes sense for your trip and your budget.

Sa El, CEO of Simply Insurance says it's important to make sure your travel insurance provider has a strong reputation, an easy claims process, and proof that they pay claims reliably.

"This might seem like the last thing you should look for," he said. "But there is nothing worse than attempting to file a claim and the insurance company is giving you the runaround."

What to look for in a policy

However, travel insurance policies aren't necessarily created equal. In addition to buying insurance from a reputable company, you need to pick a policy that includes the types of coverage you need for your specific trip. Here's what you need to know:

Make sure your policy includes trip cancellation/interruption insurance

Carol Mueller, Vice President of Strategic Marketing at Berkshire Hathaway Travel Protection, says that the most common travel insurance claim in the U.S. is trip cancellation or "reimbursement for your trip investment if you must cancel for a covered reason." This type of coverage comes into play when you have a trip booked and paid for but can't go due to health problems, civil unrest in your destination, or any other reasons your policy agrees to cover.

"It's important for travelers to purchase a policy with trip cancellation and interruption coverage if they want their trip deposits covered," she said. Without this type of coverage, you could lose any deposits you've made on your trip or any other amounts you paid upfront.

While many hotels let you cancel up to 24 hours before your stay without a penalty, remember this isn't the case with airlines at all. Plus, there may be other components of your trip paid upfront including cruises, train travel, park tickets, group tours, and more. Trip cancellation/interruption insurance can reimburse you for all qualified reasons when you are unable to travel. (See also: 7 Times Travel Insurance Is Worth It)

Pay extra for medical expense and medical evacuation coverage

Also, if traveling outside the U.S., Mueller says you should make sure your plan also includes coverage and adequate limits of emergency medical expenses and medical evacuation coverage. "A comprehensive plan like Berkshire Hathaway Travel Protection's ExactCare Extra will include those coverages and more," she said.

With this specific policy, you get up to $50,000 in qualifying medical expenses reimbursed and up to $500,000 in emergency evacuation and repatriation of remains coverage. That might sound like a lot, but imagine how much it might cost if you broke your legs while hiking in a foreign country and had to be evacuated by helicopter. Or, just think of how much it would cost to have a heart attack abroad and fly home overseas with around-the-clock medical care.

The bottom line: Paying extra for this type of coverage will be well worth it if you ever need it, and some policies include it already.

Some policies also offer fixed reimbursements

Mueller also notes that some policies have fixed benefits that pay out in a set amount any time a qualified event happens during your trip. With their ExactCare Extra plan, for example, you get a payout each time you miss a connection and get rerouted to your destination.

"While the airline is rebooking you on a later flight, ExactCare Extra automatically pays out $100 directly to you for simply enduring the glitch on your vacation," she said.

Benefits you may not need

While it's smart to pick a travel insurance policy that is as comprehensive as possible, Sa El said that you may not want to pay extra for optional benefits like Accidental Death Insurance or excessive amounts of coverage for your personal items.

"This is mainly because there are probably other policies such as your life insurance, renter's insurance, or home insurance plans that will cover you for those items," he said.

You may also want to explore any travel insurance benefits you receive from a travel credit card. Consumers with a travel card may already qualify for trip cancellation and interruption coverage, primary auto rental coverage, baggage delay insurance, trip delay insurance, lost luggage reimbursement, travel and emergency assistance, and travel accident insurance, among other perks.

Keep in mind though that rewards credit cards offering travel insurance tend to be extremely light on medical coverage — if they offer any at all. Because medical bills can get out of control in a hurry, that can be a problem. (See also: When Is Your Credit Card's Travel Insurance Good Enough?)

The bottom line

Before you take your next trip anywhere — especially far from home — make sure you have a travel insurance policy in place. You may believe you can't afford to pay extra for this coverage, but the reality is, you may not be able to afford not to.

Losing thousands of dollars in trip deposits or flights is bad enough, but racking up hundreds of thousands of dollars in medical bills and emergency evacuation expenses could ruin your finances for years to come. With an affordable travel insurance policy in place, you can stop worrying about the "what ifs" and enjoy your trip.

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