Travel insurance sure seems like a simple concept: By its nature, travel involves the unexpected, so it just makes sense to have a little extra insurance when you do it. So we at Credit.com started out with two very simple questions:1. Should consumers get travel insurance?
2. Should they get it through their credit cards, many of which offer different forms of coverage?
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We quickly discovered that with travel insurance, simple questions often involve complicated answers. That’s partly because travel insurance can mean so many different things. One automatically thinks of insuring one’s luggage, and insuring against the entire trip getting cancelled due to weather or some unforeseen accident.
But there’s a lot more to it. Should you insure your rental car? That may depend on whether you stay in the United States or go abroad. If you have a medical emergency while overseas, does your insurance pay to fly you home? Or does their coverage involve simply a referral service, where they connect you to a medical evacuation company?
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It’s also because protection can come from so many different sources. Credit card companies offer travel insurance. So do auto insurers, life insurers and AAA. For the average person about to set off on a trip, each type of company offers its own set of strengths and weaknesses.
“It can get very complicated,” says John W. Cook, former executive in charge of traveller insurance for travellers Insurance Company, and now president of QuoteWright.com.
An organising Principle: Figure Out Your Fears.
The first step in figuring out which type of travel insurance you need is to figure out what you’re actually worried about. If you have to rent a car in London and you’ve never driven on the left side of the road, your concerns will be a lot different than if you’re going on an African safari with plenty of professional drivers but no speedy access to hospital care.
If you’re spending $2,000 on airfare to Europe, it may not be worth the $75 to $165 you’d spend on trip cancellation insurance, Cook says. But if you’re booking a $50,000 trip on a luxury cruise liner, a little insurance might make sense, especially if you’re worried that your spouse’s health might decline before you set sail.
“My recommendation: Know what you need,” Cook says.
Another thing to consider, Cook says, is that most people worry about insuring the wrong things. When we’re thinking about what could go wrong on a trip, many people immediately think “lost luggage.” But bags actually go missing quite infrequently these days. Lost luggage insurance generally doesn’t cover things like laptops or expensive electronics, since often such devices are owned by a business and not by the individual who’s flying.
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Which means in most cases, you’re only insured for the price of the bag itself, and maybe some of the clothes inside, says Cook. Many travel insurance policies, whether offered by credit cards or traditional travel insurers, include some form of protection for lost baggage. And such coverage is nice to have.
But don’t base your decision on which travel insurance to buy based on its cost or coverage of lost bags.
“I’ve never heard of a person going bankrupt because they lost their luggage,” Cook says.
What You Should Worry About: The Big Ticket Items
A lost bag might be a pain. Paying $100,000 for a medical evacuation in a private jet from Europe to the United States is something more. When it comes to shopping for travel insurance, Cook says, think about the big ticket items first. In descending order of cost, here are the biggest travel-related problems you might need to insure against:
1. Medical evacuation. It depends on where you need to go, but $100k is not uncommon for an evacuation on a private jet. Even flying commercial may cost tens of thousands of dollars because you need to buy tickets for a nurse and a doctor, depending on the medical condition.
2. Medical coverage while abroad. Medicare doesn’t cover procedures outside of the United States. Some supplemental insurers offer additional coverage for care abroad, while others don’t.
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3. Rental car. Even for trips inside the US, you can’t assume that your auto insurance policy covers rental cars. Outside the US, rates and plans vary even more.
4. Trip investment. What happens if you’re on a cruise and your mother falls seriously ill? Will your insurance cover the flight back home, plus refund you the remainder of your days on the cruise? Not always. It might actually depend on whether she was sick when you left. “Pre-existing medical conditions can throw big wrench into it,” Cook says.
In every case, you have options to weigh. Depending on your age, your heath, the health of your family members and the type of trip you’re planning, the right kind of travel insurance for someone else might be totally wrong for you. In future stories we’ll sort out these different types of travel insurance, and the different types of companies offering them, to help you decide what makes the most sense for your trip.
This story originally appeared on Credit.com
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