I do think it is advisable:
- To be certain that your health coverage is adequate. Many robust private insurance plans in the US will cover medically necessary coverage abroad, but this is not universally true or always the case for citizens of other countries.
- If traveling to remote areas or places without advanced medical care, that ‘medical evacuation coverage’ be considered.
More generally, you insure against really big (and generally low probability) costs which if incurred would be catastrophic to absorb.
This is in stark contrast to the sorts of tickets you buy online, where Orbitz or your airline may offer you travel insurance.
- You’re insuring a relatively small amount of money most of the time.
- There’s lots of fine print, you may not be as ‘covered’ as you think you are.
- It may be a hassle, costly in terms of time and effort, to secure payment.
For losses like airline tickets in the event of a medical issue, most people are best off “self-insuring.”
Plus, many events that could be covered by travel insurance – especially for a simple trip – may be already covered when you use a premium credit card to pay for your tickets. The cost of hotel nights or incidentals on the road due to delays, or modest clothes and other expenses incurred when bags aren’t delivered, is the sort of thing that premium cards often bundle. You’ll still have to go through the hassle of a claim, but may not need to pay a premium for the privilege of doing so.
Something that really underscored how these products — when applied to basic airfare — may not make sense is when I was first approached by a travel insurance provider about four years ago with the suggestion that I sell their coverage as part of my award consulting service. They offered me 49% commission. That was a big red flag. Insurance should be paying out a much higher percentage of a premium to be worthwhile, such that a commission like that would be impossible.
Nonetheless, I was always curious about how travel insurance would work for award tickets. I had a general notion but decided recently to touch in with the folks at TravelGuard (whose coverage I’ve always heard spoken of highly — my impression though mostly in the context of big, expensive trips like high end cruises or safaris).
They explained to me that travel insurance for an airline ticket generally covers up to the value paid for the ticket itself — so for an award ticket, it would cover only the taxes paid. It would not pay to buy a revenue ticket to replace a mileage one. Although it would generally cover any cancellation and reinstatement or change fees related to a covered event.
Put another way, coverage for an award ticket isn’t going to pay to send you home or to buy you new travel if there’s no award space available.
It turns out that there is a form of coverage that would help here.
Travel Guard offers a “Return Air Only” coverage, at a fixed dollar amount, with benefit limits ranging between $500 and $1,000 depending on the policy. This allows you to have a fixed dollar amount for change fees and additional air ticket costs if you have to return home early, subject to policy terms and conditions, even if your insured trip cost is low due to your ticket being purchased with rewards miles or points.
Personally I wouldn’t pay for insurance (that I’ll have to go through a hassle to collect on) when the maximum payout is $500 or $1000. That’s the sort of eventuality I self-insure against.
However, since it’s a question I do get from time to time and some readers may be interested, in the case of travel insurance for an award ticket it’s this sort of “Return Air Only” coverage that may be useful.
And of course coverage for trip interruption and baggage delay, which can cover hotel nights and necessary clothing and other incidentals along the way, is interesting to some as well.