BY MICHAEL GIUSTI
In many ways, the beginning of the summer travel season ushered in a return to normalcy. But as the dog days arrived, they brought with them a dreaded fourth spike of COVID-19, fueled by the vicious delta variant. Now, the risks of travel, and specifically, traveling during a pandemic are coming back into focus.
So, along with masked airplane rides, and frequent virus testing, the importance of travel insurance has again taken center stage. On the bright side, the pandemic’s influence on the travel insurance industry has broken generally in the consumers’ favor. Pre-pandemic, infectious diseases tended to be specifically excluded in travel insurance policies.
But, faced with a flood of COVID-19-related claims, the travel insurance carriers surprised many observers by looking past that contractual exemption, and instead largely treating COVID-19 like any other illness covered by a travel policy. That is to say, most paid out coronavirus-related claims.
So, moving forward, with a delta-variant-fueled surge threatening late summer and fall travel, a look at how the pandemic has affected the travel industry makes a lot of sense.
The State of Travel Insurance Yesterday, Today and Tomorrow
When travel ground to a halt in 2020, many industry observers predicted a coming spike in travel insurance premiums. Thankfully, so far at least, those rate increases have not materialized. Instead, companies modified policy language so it is better equipped to face down the pandemic.
It is useful to start by looking at what is included in a typical travel insurance policy today. At its most basic, a travel insurance policy is there to protect your investment in prepaid, nonrefundable deposits in the case that your trip is canceled for a reason that is both beyond your control and that is covered by the policy.
So, say you booked a cruise, but the week before the trip, a hurricane knocked out the port you were supposed to leave from. Or, say your wine country vacation was canceled by a raging wildfire that forced the evacuation of the county you were slated to visit. Those are scenarios tailor-made for travel insurance.
Interruption clauses, found in many of today’s policies, are also handy if you have to cut your trip short for covered reasons beyond your control, like if you fell ill mid trip. But travel insurance policies come in more than just one flavor.
Travel insurance policies can also cover health care you might need on your trip. If you have private health care insurance, this may not seem like that big a deal — your private plan would cover you in the case of an emergency, even if you were away from your home network.
But routine care would not be covered – or at least would charge you out-of-network prices. Without a travel insurance policy to kick in, you may be on the hook for something that doesn’t rise to an emergency level but still needed medical attention – say you caught a stomach bug, or you developed a rash and needed to see a local doctor.
The health portion is especially valuable if you travel overseas, where your private health care is much less likely to extend protection. Travel policies also cover so-called medical evacuations, which kick in if you have a medical emergency and need to be transported a long way to get appropriate care — which, without coverage, can cost a pretty penny. The medical portion of your trip is really where international travel policies shine.
The other place international travel insurance policies become essential is when your destination country insists on coverage. Since the onset of the pandemic, some countries have begun insisting that travelers take out a minimum travel insurance policy as a condition of even getting a visa in the first place.
Travel insurance policies also can be valuable if they cover any lost or destroyed luggage, and many kick in to help you if your passport is lost, damaged, or stolen.
How Insurers Calculate Travel Insurance Pricing
Travel insurance companies take a lot of factors into consideration when they are setting pricing. Typically, policies are priced as a percentage of your un-refundable portion of travel – 4% to 10% of the insured cost, depending on several variables.
Overall Cost of Trip
More expensive trips with large up-front costs are more expansive to insure. Longer, more complex trips, and ones involving many different travelers are also more expensive, because with every variable comes another opportunity for the trip to get ruined.
The age of the traveler is also a huge factor when it comes to pricing, but it isn’t a sliding scale the way life insurance is. A 24-year-old will typically pay the same as a 27-year-old, but once you hit a threshold, the cost jumps. Those thresholds are called age bands, and different policies set their bands at different ages. The general rule, though, is that older travelers present more of a risk than younger travelers, and so their policies are priced higher.
Where You Are Going
Where you are traveling matters, too, in many policies. Every destination presents unique risks. For example, a remote island or a deep jungle with few backup-travel options in and out will cost more than a hub city with loads of ways to take care of you and get you home in the event of an emergency.
Possibly If You Are Vaccinated or Not
One thing that may emerge as a factor when it comes to pandemic travel is the COVID-19 vaccine. Currently there are no public plans to mandate the vaccine as a condition of getting a travel insurance policy, but there are conversations, especially in Europe, among some insurers that may start mandating a vaccine as a condition of getting a policy, especially if the European Union or other countries mandate vaccines for incoming travelers.
You could also imagine higher rates for unvaccinated travelers, or even denying policies to people, depending on vaccination status. But any movement in that direction is still a ways away.
Unique Considerations for Cruises, Resorts and More
There are some trips that make a lot of sense to cover with a travel insurance policy, while some make no sense at all. For one, since cruises or resort destinations tend to require large prepaid deposits, or even payment in full in advance, they present a particular risk for travelers.
Cruise lines and resorts offer some coverage, but that doesn’t mean they are automatically the best deal. Any time you have to put thousands of dollars down for an un-refundable deposit, a travel insurance policy makes a lot of sense.
Most hotels have adopted generous cancelation policies during the pandemic, but that isn’t the case with many private-party reservations, such as through Airbnb or VRBO. Many of those private owners are asking for cash up front with no cancelations allowed, which again make travel insurance attractive.
When it comes to rental cars, many risks are often covered by travel insurance policies, but whether that coverage makes sense depends on each traveler’s individual situation. Comprehensive automotive policies on their own vehicle would typically extend to a rental car, so buying coverage for a rental car through a travel insurance policy may be redundant.
On the other hand, getting a separate travel policy may make sense so that any claim wouldn’t translate to several years of hiked premiums if the rental car company makes a claim against your personal policy, especially for a relatively small claim.
In that same spirit, look at other places you might already be covered when you travel. Some premium credit cards may include some travel insurance if you use that card to book the trip. And some other things you already pay for, like a AAA membership, may already offer coverage for no extra cost.
As you are booking your travel, pay special attention to those cancelation policies. If your airline offers to waive change fees, and if your hotel offers to let you cancel without penalty, you should really look twice whether a policy makes sense at all.
The Final Word on Travel Insurance Through 2021
While many policies have adapted to the pandemic, don’t make any assumptions. Just like with any insurance policy, read the fine print before you buy. And don’t be afraid of asking questions – if you don’t understand it, the worst thing to do would be to take something for granted when it is not explicitly stated in the policy.
Not all policies are the same, and they don’t all cover the same thing. When you are considering travel insurance, don’t necessarily take the first, most convenient option. Shop around. Find the right policy at the right price. Don’t overpay, but make sure your coverage is up to your risks.
Also make sure to book your insurance policy early. Once you pay your deposits, the clock starts ticking. Many companies won’t write policies if you don’t buy it within just a few days of the trip being purchased. So, if you booked your trip in April but are now worried about the delta variant, it is likely too late for travel insurance now.
One of the most important points when it comes to travel insurance is that it only covers things that are beyond your control. Fear of travel is never covered. So, while it might be scary to travel to a COVID hotspot, that doesn’t mean that your insurance policy will pay a dime if you choose to cancel your trip because of an outbreak.
Also, government shutdowns aren’t typically covered by standard travel insurance policies. In the case of government shutdowns, and fear of travel, the only way you would be covered is if you purchased a “Cancel For Any Reason” policy. These are more expensive, and they pay out a smaller percentage of your costs, but just like their name implies, they pay out for almost any reason you chose.
This can be a great option if you are a timid traveler, or if you have a lot of unknown variables to consider.
And finally, even if it isn’t required, don’t overlook the readily accessible and typically free COVID-19 testing — before, and especially after your trip. While they aren’t required by travel insurance policies, they are just a good idea for the safety and peace of mind for you and your loved ones.