By Richard A. McGrath, CIC, LIA
An accident or illness, or a canceled trip can ruin a vacation, but being properly insured can help consumers make the best of it.
Depending on your vacation plans, it may be advisable to consider travel insurance, car rental insurance or additions to your existing coverage. In any case, it is important to not only be properly covered, but also to avoid buying insurance you don’t need.
While many travel protection needs are likely covered by your current insurance, some may not be. Travel insurance encompasses many types of protection, including trip cancellation or delay, lost or delayed baggage, medical and dental needs, emergency evacuations, 24-hour traveler assistance and accidental death.
The four major types of travel insurance include:
Trip cancellation insurance, which provides reimbursement in case you have to cancel your trip because of illness or other unanticipated circumstances. It will also reimburse you if the cruise or tour operator goes out of business. In addition, it will reimburse you for the unused portion of your vacation if you or an immediate family member become seriously ill or are injured during the trip.
Another option is to purchase the waivers offered by cruise and tour companies, but they typically include many restrictions. For example, they may not cover you immediately before departure or after the trip begins, which is when people are most likely to cancel, and they will not help if the tour company goes out of business.
Trip cancellation insurance, which typically costs five to seven percent of the cost of a vacation, is typically more expensive than a waiver, but it provides much better coverage.
Emergency medical assistance coverage, which provides international coverage in case you need to be cared for in a foreign hospital or flown home (a significant expense if you have to be flown on a stretcher, accompanied by a doctor). If you’re planning a potentially dangerous trip, such as surfing, skiing or mountain climbing, it is especially important to make certain you’ll be covered if you have an accident.
If your plan provides coverage outside the U.S., be sure to carry your insurance policy identity card with you, as well as a claim form. Before buying, make certain you have a complete understanding of your existing coverage and any limits.
Baggage insurance, also known as personal effects coverage, is often unnecessary, as homeowner’s insurance typically includes off-premises theft coverage. Off-premises theft insurance typically will reimburse you if your personal belongings are lost, stolen or damaged during a trip.
In addition to checking your homeowner’s coverage, ask your airline and tour operator how much insurance they provide for your belongings.
If you travel with expensive electronic equipment, jewelry, musical instruments or sporting gear, you may want to add a floater or endorsement to your homeowner’s policy. You can buy coverage to insure against the loss or damage to any item for a year for just $10 to $40 per $1,000 worth of coverage.
Accidental death insurance may be unnecessary if you have sufficient life insurance coverage, but it is another way to ensure that your survivors will not endure financial hardship in case tragedy strikes during vacation.
Car Rental Insurance
As with travel insurance, it is important to understand your existing coverage before you purchase unnecessary car rental insurance. Make certain you know what’s covered before you get to the rental counter, as sales staff will typically try to pressure you to buy insurance.
Some renters purchase all of the coverage offered, even though they don’t need it, while others decline insurance without knowing if they are covered by other policies. If you know your coverage beforehand, you can avoid wasting money while also making certain you are properly covered.
If you travel often and lack sufficient coverage, adding a rider to your existing policy or purchasing an umbrella liability policy may be more cost effective than buying rental car insurance. Umbrella liability insurance provides protection beyond your auto and homeowner’s policies, and includes coverage for accidents while driving a rental car. Umbrella coverage typically costs a few hundred dollars for a million dollars worth of coverage and a small amount more for each additional million in coverage.
Before your trip, contact your insurance representative and the company whose credit card you plan to use to pay for your rental car. In most cases, whatever coverage and deductibles you have on your own car will apply when you rent a car, as long as you are not using the car for business.
Insurance offered at no cost through credit cards typically covers only damage to or loss of the rented vehicle. It usually does not cover loss of personal belongings, damage to other cars or property, or personal liability for bodily injury or death claims. Some credit cards cover towing costs.
Benefits offered by credit card companies vary, so if you have more than one card, compare benefits before deciding which card to use. Benefits may also depend on the level of credit card used; for example, a platinum card typically offers better coverage than a gold card.
Car rental companies offer four types of coverage worth considering if you do not already have the coverage:
- Loss damage waiver (LDW), also known as a collision damage waiver, relieves renters of financial responsibility if a rental car is damaged or stolen. In most cases, waivers also provide coverage for “loss of use,” in case the rental car company charges the renter for the time a damaged car cannot be used because it is being repaired. Waivers are sometimes void if an accident is caused by speeding, driving on unpaved roads or driving while intoxicated.
- Liability coverage provides financial protection from lawsuits in case you are sued following an accident involving a rental car. Rental car companies are required by law to provide liability insurance, but the amount of coverage is generally low and the company has the right to recover the money it pays out from the renter. it is advisable to have additional coverage. The
- Personal accident insurance covers medical expenses incurred by you and any passengers resulting from injuries in a car crash.
- Personal effects insurance provides protection from the theft of items in your car. This coverage may be unnecessary if off-premises theft coverage is included in your homeowner’s or renter’s insurance policy.
If you are planning to rent a car abroad, you may need an international driver’s license. Rental insurance for traveling into Mexico may be especially expensive, given that crime rates have risen there and the risk of theft or injury are higher than in the U.S.
Paying for additional insurance will add to the cost, but it can also help to ensure that you have an enjoyable, worry-free vacation.
Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass. He can be reached at email@example.com.
This article is written for informational purposes only and should not be construed as providing legal advice.