12 Travel Insurance Gotchas You Need to Know

“Do you want insurance?” When you book a flight, you’re likely to get that question from an agent, or to see it beside a digital ‘check’ box you might ignore. And it’s often fine to pass over: Lots of travel insurance is, in fact, either unnecessary or overpriced—or both.

But certainly, there are times when travel insurance really is a good idea. Like:

• Trip-cancellation insurance (TCI): You need it any time you have a prepayment that is larger than you can afford to walk away from if you unexpectedly have to cancel the trip.
• Trip-interruption insurance (TII, almost always bundled with TCI): You might need it if you’re traveling someplace where having to return home unexpectedly would cost you a lot in extra fares and fees.
• Medical insurance: You probably need it if your regular health insurance doesn’t cover you adequately when you’re out of the United States. That includes everybody on Medicare plus many others.
• Medical evacuation (medevac, often included with medical): You might need it if you suffer a sickness or injury that requires special transport—helicopter or private jet, for example—to a hospital or home, often not covered by conventional medical insurance.

And with any kind of insurance, you have to worry about hidden gotchas that can leave you high and dry, even if you thought you paid for top-notch coverage. Insurance companies hire agents who are experts at figuring out reasons not to pay claims. Here are the main trouble spots to keep in mind before you buy, and how you might be able to minimize your risk of being duped.

‘Named Peril’ Insurance

Travel insurance is typically “named peril” insurance, which means that it covers only those contingencies and individuals specifically named in its contract. Conventional TCI/TII and medical/medevac policies all contain laundry lists of occurrences that the insurer will accept as reasons for cancellation; these are listed as “covered reasons” and vary from policy to policy. This gotcha rule is simple: If it isn’t named, it isn’t covered. And check policies carefully, as named perils vary from policy to policy.

‘Covered Reasons’

Covered reasons—the named perils each policy covers—typically include a wide range of sicknesses and accidents—breaking a leg or coming down with pneumonia, for example—that could befall you, your traveling companion, or a close relative at home. But they also usually include unexpected events such as a fire at your home or a call to jury duty. And they generally include force majeure events, at either your destination or at home, that would prevent you from traveling: hurricanes, floods, fires, political events such as terrorist attacks, and default of a travel supplier. But they seldom include anything even remotely foreseeable, such as elective surgery, or risky behavior, such as downhill skiing.  And they exclude self-inflicted injuries.

Minimizing the risk: Buy a “cancel for any reason” policy, but see item seven for gotchas in those.

Financial Default

Most TCI/TII policies cover default of a supplier. But the definition of “default” is pretty narrow: namely, if the supplier quits business entirely. Some policies cover just “bankruptcy” rather than “default,” which can be a problem since many failed suppliers never get around to filing bankruptcy. Also, the default condition does not apply if a supplier has to cut back operations due to a financial problem but stays in business. Other coverages in the policy may include these instances, but you can’t be sure. And default policies never cover default of the supplier from which you buy the insurance.

Minimizing the risk: Get a policy with the broadest definition of “default,” and never buy insurance through your travel supplier.

Destination Problems

Most policies allow you to cancel for weather or similar reasons only if your airline stops flying to your destination or your hotel is “uninhabitable.” For example, as long as your golf-resort hotel is habitable, the insurance won’t cover cancellation because the golf course is unplayable. And weather-based cancellations are generally not valid if you buy the insurance after a major storm at your destination has already been identified or named by the National Weather Service. Similarly, civil unrest and crime at your destination are typically not covered unless the State Department has actually issued a warning. 

Minimizing the risk: Get a policy with the broadest definition of “destination problems,” but recognize that you can’t completely avoid this risk.

‘Preexisting’ Medical Conditions

Most ordinary TCI/TII and medical insurance excludes coverage for a preexisting medical condition: a sickness or condition for which you received treatment within a certain period, usually 60 to 180 days, before you purchased insurance. Depending on the policy, this can mean a condition for which you showed symptoms that would have prompted a reasonable person to seek diagnosis, care, or treatment; for which care or treatment was given or recommended by a physician; or that required the taking of prescription drugs or medicines.

Minimizing the risk: Most insurers waive this exclusion if you buy the insurance within a short period of time—a few days to two weeks, depending on the policy—from the date that you make your first prepayment or deposit. This protection costs nothing, and it avoids the most common cause of disagreements between travelers and insurers.

‘Forseeable’ Conditions

Even if you take advantage of a preexisting-conditions waiver, an insurer can still deny your claim for a loss due to a preexisting condition that is foreseeable at the time you buy the policy. If, for example, a close family member has previously been diagnosed with late-stage terminal cancer, you probably can’t cancel your trip because that person suddenly gets worse or dies. You won’t be covered if a travel warning is in effect for your destination when you buy the insurance. And you must be able to travel at the time you buy the insurance.

Minimizing the risk: You can’t change these rules; just be aware of them.

Cancel for Any Reason Conditions

Many insurers now offer an optional “cancel for any reason” or “cancel for work reasons” policy addition. For many travelers, unexpected work demands are the most likely reason to cancel, and these policies avoid that risk. Similarly, if you want to cancel because of civil unrest in your destination, you can.

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But these policies are a bit different from ordinary policies: They only allow cancellation up to 48 hours prior to departure, some offer only 75 percent or 90 percent coverage, and most are more expensive than conventional policies. Legally, some jurisdictions do not even consider them “insurance.” 

Minimizing the risk: You can’t do much beyond what is allowed in the policy.

Secondary Coverage

Many elements of travel insurance are secondary, meaning the policies pay for only what you can’t first recover from your suppliers and your other insurance. With TCI/TII, you have to seek as much of a refund as you can from your airline, resort, cruise line, vacation rental, or whatever. With medical expenses, you have to claim from your own insurance first (if it covers you where you are), and you might have to front the money for emergency care on the spot and later claim reimbursement from your own insurance. With personal effects (like clothing and toiletries), baggage, and such, you may first have to claim from your carrier and your own insurance. 

Minimizing the risk: Some policies provide primary medical, personal-effects, and other coverages—much preferred to secondary policies.

Improvising

TCI/TII and medical/medevac insurance both require that you follow the rules. Specifically, that means you have to let the insurance company make all the necessary arrangements, including choosing the physician and hospital, arranging return transportation, and lots of other details. The travel-insurance industry is full of legends about travelers who made their own arrangements—and didn’t get paid. 

Minimizing the risk: Easy—just do what the policy says.

Less-than-Full Payment

If you cover less than the full cost of your trip—even if you just “round down” your prepayments—some policies will invalidate the entire coverage. Most policies require that you cover the total nonrefundable portion of your trip, including payments that really don’t worry you, and a few require that you cover the total trip cost, including refundable deposits. 

Minimizing the Risk: Check the fine print of any policy you’re considering, and avoid those that require you to cover refundable payments.

Age-Based Pricing

Most TCI/TII and medical/medevac rates depend on your age. Rates start to rise rapidly for travelers 70 and over.

Minimizing the risk: The big online insurance agencies automatically price your quote to your age—and unless you pay a lot, you may have to give up the waiver of preexisting medical conditions. Also, some policies that are not age rated impose a maximum age. Supplier waivers are usually not age rated, so even if their coverage is inferior to third-party policies, they may be your only practical choice if you’re in your 70s or older.

Expecting Miracles

Like most insurance, TCI/TII is about money and only money. It can’t preserve your vacation or arrange or pay for an alternate trip. And because so much TCI/TII is secondary, even if it covers your claims, you could be paying out of pocket for months and might have to pay up front for any substitute arrangements.

Minimizing the risk: Even if you buy insurance, have a “plan B” in mind in case something goes wrong with your original trip.

More from SmarterTravel:

• Travel Insurance Coverage: 17 Things Your Policy Won’t Cover
• 5 Common Travel Insurance Questions, Answered
• 8 Vital Things You Need to Know About Travel Insurance

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Consumer advocate Ed Perkins has been writing about travel for more than three decades. The founding editor of the Consumer Reports Travel Letter, he continues to inform travelers and fight consumer abuse every day at SmarterTravel.

Editor’s note: This story was originally published in 2015. It has been updated to reflect the most current information.