Travel Insurance – Should You Get It? and How We Massively Overspent

As I’ve mentioned before, I still can’t get over the fact that we spent almost $700 on travel insurance, a major part of our budget for SE Asia and still a significant portion of our larger budget for New Zealand. After many hours of research, questions to friends and relatives, and even a poll here on the blog, I’ve come to the disappointing conclusion that we paid WAY too much for our travel insurance. How, you ask? It went something like this:

  1. Travel insurance is complicated.
  2. It’s hard to tell if it’s necessary, but the decision is emotional with respect to peace of mind, for you and possibly your family at home.
  3. It can be quite expensive, especially if you’re not smart about it for cheap trips.
  4. Points 1-3 led me to waste HUNDREDS of dollars purchasing too much insurance.

Here’s what I should’ve done instead and how I’ll buy insurance in the future.

My travel insurance would've covered me if something bad happened while hiking in New Zealand, but at a pretty high cost!
My travel insurance would’ve covered me if something bad happened while hiking in New Zealand, say falling into a beautiful thermal lake, but at a pretty high cost!

Travel Insurance is Complicated

Unlike car and health insurance in the US, there’s no government mandate to purchase travel insurance, nor is there a clear consensus about when it’s necessary or best to purchase.

Travel insurance can cover a wide variety of things, from medical care and medical evacuation (medevac), to trip cancellation or interruption insurance, and delayed or lost luggage. Depending on the insurance, it might pay for things like a hotel if you miss a connecting flight, or possibly even non-medical evacuation if there’s a political or natural disaster. Many providers also have a 24-hour help line to call when something happens on the road. It’s most helpful to think of these plans as “General Travel,” which bundle coverages for most of the items listed above, and then as “Travel Medical,” which only cover emergency medical care and medevac.  There are other specialty policies, but let’s just ignore those for now.

Within those two buckets of insurance, general and medical, policies are highly varied, and extremely complex. I am not going to go into the painful details because it won’t be interesting or helpful. The important thing to keep in mind is that general travel policies cover lots more and therefore cost lots more.

All this complexity makes it harder to see the value of travel insurance. I understand why many people don’t bother with it for short trips.

However on longer trips, it’s easy to feel like you should have insurance, and in those situations the simpler general policies are really attractive. These policies have lots of coverage, almost no choices, and are designed to protect travelers from all kinds of mishaps. This is easy, and I fell for it, because I didn’t stop to consider what insurance was really necessary for my trip.

Is Travel Insurance Necessary?

In my incredibly unscientific and small survey, I found that most people who read this blog did not have travel insurance for their last international trip:

TravelInsurance_PollResults

I can’t say I blame them. Before our trip to SE Asia, I had never really considered travel insurance either. (On the other hand, I did climb up Kilimanjaro at one point almost ten years ago and I must have been smart enough then to get some type of coverage. Right? Right.)

It’s hard to figure if insurance is necessary, especially since most of the evidence out there is anecdotal. It’s easy to find great reviews for those times when travel insurance paid off, the terrible reviews when someone wasn’t covered for what they expected or was stuck without insurance and with huge costs.

Closer to home, I heard through the poll:

Once I was hospitalized for food poisoning and the insurance company told me which hospital to go to and covered all the costs, and once I lost my luggage (like really lost for 3 months before it turned up) and they paid for all the clothes I bought on vacation and replacement cost for my lost luggage.

Unfortunately, I can’t find any stats on how often travelers make successful and unsuccessful insurance claims for standard general travel insurance items like lost luggage, trip delays, or other travel snafus. On our budget trip, without expensive luggage or deposits, it just doesn’t make sense to pay hundreds of dollars for this insurance that is probably only worth low thousands of potential loss protection. The math looks different if you’re a less budget-conscious or more pre-planned traveller. For some people, this is where the decision starts to get a little emotional and intangible, too, as it’s hard to value peace of mind.

But moving back to the most rational side of the discussion, I do want to be protected for true emergencies and any financial nightmare scenarios, which for me are medical treatment or medevac.

I can easily imagine some terrible scenarios like a shark or bear attack, cerebral malaria, or, most realistically, a fall leading to a head or back injury. Had this happened on one of our past trips, we could’ve been out tens or even small hundreds of thousands for medical expenses. (I don’t have any actual facts or stats here, so I’m basing that on typical medical coverage limits.) Given this massive (estimated) potential downside, this is one type of coverage I won’t leave the US without again. 

So for me, there’s no rationale for general travel insurance, but medical insurance and medevac are now a must-have. Realizing that difference will help me with my next complaint…

Travel Insurance Is Expensive

When I originally planned our SE Asia and NZ trip, my thought process went like this: I want to be covered, mostly in case of medical emergency. Most long-term travelers swear by travel insurance and World Nomads is a very widely recognized brand. Therefore, that’s the right answer and I should buy it.

What a mistake. Had I shopped around, I may have seen prices ranging from quite expensive down to almost nothing, and started asking more intelligent questions about coverage.

TravelInsurance_PriceQuotes

Since I didn’t shop around before we left, these quotes are for a 3.5 month trip starting on March 1, 2016, for various medical and general travel insurance policies. We paid that HUGE World Nomads price. Whoops. The folks at SquareMouth told me that the $32 InsureandGo quote is so amazingly low because that company doesn’t charge more as the trip gets longer.

In this case, purchasing the cheap policy with adequate coverage could’ve saved us $642. Even if that fluke pricing wasn’t available, I should’ve spent around $200, not nearly $700.

Next time, I’ll be looking for medical and medevac only. I know this solution is somewhat trip specific for us because we had small and inexpensive luggage and didn’t pay big deposits in advance, it still might make sense for budget-conscious travelers on longer trips.

So, for next time, here’s my plan:

How to Buy Travel Insurance

  1. Consider already available coverage. Some US insurance companies cover emergency medical care outside the country, especially if you travel for work. Call to figure it out. Similarly, some travel agents or credit cards have coverage so call them to check, too.
  2. Determine what coverage is needed.  My opinion is that everyone should travel with medical and medevac insurance. When I’m traveling cheap, light and not making large deposits, I will skip the expensive general travel insurance.
  3. Shop around before buying. Comparison shop at sites like SquareMouth and InsureMyTrip to see all the options and get the best prices.

From there, it’s on to insurance basics like keeping track of phone numbers and paperwork. One final recommendation is to get a Google Voice number or set up skype on your phone or computer to call US and toll-free numbers for free over internet.

In Summary

I know there’s a lot going on here and, despite my best efforts, it’s a little dry, so here it is one more time:

  • Travel insurance is complicated but the two main buckets are general travel insurance and the more-specific medical travel insurance.  General covers a lot more situations, but costs more and has more questionable value, especially if you travel like we do, on the cheap and without many expensive, advance bookings.
  • Travel medical insurance and medevac can protect from potentially high costs of medical treatment or repatriation. I’m not travelling without this again.
  • When buying, consider any coverage you already have, then comparison shop at sites like SquareMouth and InsureMyTrip to see options and get the best prices.

5 thoughts on “Travel Insurance – Should You Get It? and How We Massively Overspent”

  1. Great analysis with which I concur.

    Separate topic: I’d value hearing your advice about traveling safely (avoiding crime, theft, and illness) in foreign countries.

    1. Thanks! Hopefully it saves someone else from the mistake in the meantime. Great idea, too. I will see if I can string together some intelligent commentary about being safe abroad. My initial reaction is that we didn’t do anything unusual to stay safe and we were probably a little lucky. The stuff that comes to mind is traveling light, not carrying or wearing anything too expensive-looking, generally drinking and eating where we saw others, and staying together with our wits about us. It probably didn’t hurt that Adam is a little oversized, too.

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