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The Truth About Travel Insurance

Buying an insurance policy that covers unexpected medical expenses during a trip to a foreign country might be a good idea. The same goes for insuring the money you spend for an expensive vacation. However, travel insurance policies that cover other things, including lost baggage or a plane crash, aren’t worth your hard-earned cash.

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A recent advertisement for travel insurance in national newspapers warns: “You never know what’s out there.” Hazards are waiting on your next trip to a tropical beach, the ad suggests. What if you lose your wallet? Or suffer heat stroke? Or step on sharp coral? Or run into an unhappy crab?

If the threat of an “unhappy crab” sounds silly, it should. Because, in many cases, we think paying extra for travel insurance is just as silly. In some cases, you might not even realize you paid for it.

Don’t get the wrong idea. Buying travel insurance is sometimes a smart move, especially if you’re taking an expensive trip or if you’re booking a vacation in a foreign country where the right policy can cover unexpected medical expenses. But there are many other instances where travel insurance policies cover things that don’t necessarily need to be insured. Furthermore, travel insurance can cover a wide swath of trip-related issues. The cost of travel insurance depends on several factors, especially where you’re going and how long you’ll be there. You can spend as much as $500 for a policy that bundles all sorts of coverage, including costs for medical care and an emergency evacuation, or a refund if you have to cancel your trip at the last second. Or you can buy specific policies for as little as $10 to target a single concern, such as rental cars or lost luggage.

TAKING FLIGHT. Figuring out whether travel insurance, a largely unregulated business, is necessary is more important than ever, because travelers are being offered these policies like never before. The sale and purchase of travel insurance was rare in the United States before 9/11; fewer than 10 percent of U.S. travelers bought it then. Today about half of all U.S. travelers purchase some sort of travel insurance, according to United States Travel Insurance Association (USTIA). Look at it this way: Americans spent nearly as much on travel insurance in 2006 ($1.3 billion) as they spent on purchasing movies online ($1.5 billion).

Cruise operators, airlines, travel agents and other travel providers have made insurance an integral part of the shopping experience. There are dozens of independent companies that sell travel insurance, including 24 that belong to USTIA. But you’ll almost always be solicited to purchase travel insurance when you book your trip with a travel agent. It’s always included as an option when you book a trip yourself online, where more than half of all policies are bought.

Policies to Avoid

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Although no one can be forced to buy, some online sellers—travel sites, airlines, cruise lines and companies that sell vacation packages—make travel insurance an “opt-out” addition to any purchase. This obnoxious practice means travel insurance will automatically be added to the cost of your trip unless you click on a box to eliminate the add-on. So, if you overlook that part when booking your trip online, you could be paying for insurance without knowing it. They can get away with this (yes, it’s legal), because they are literally giving you the option to uncheck the box and, therefore, reject travel insurance.

You’re much more likely to encounter this sneaky practice when you’re dealing with travel and cruise sites than with airlines. For example, when we recently tried booking trips on five popular online travel sites, two of them automatically checked “Yes” for the travel insurance option, two automatically checked “No” and one had nothing checked. Forcing consumers to “opt out” of a choice (which is also used to get folks to purchase extended warranties or sign up for company e-mail newsletters) is something for which you should be on the lookout every time you make a purchase on the Internet.

COVER ME. We talked with insurance experts, frequent travelers, State Department officials, travel insurance companies and officials with the travel industry. Not surprisingly, almost everyone we interviewed said buying travel insurance was a good idea. Although the problems covered by travel insurance are relatively rare, they can be expensive and even in extreme cases life-threatening, most experts say.

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