A second look at travel insurance

(MoneyWatch) I have written in the past that trip cancellation insurance is not a necessity, since most people can afford to self-insure against the risk of vacation plans gone awry. It is important, for example, that you do business with a reputable travel agency and look into a cancellation waiver.

But recent policy changes by airlines may shock unaware travelers who have to cancel or change flights because of illness or another emergency, for fees can now run as high as $200 or more.

Many kinds of "travel protection" or "trip cancellation waivers" provide a future credit for ticket costs incurred due to cancellation. The credit is issued by the concern that purchases tickets for the customer. It should be made clear that these plans do not reimburse you. Only travel insurance provided by a legitimate insurance company and regulated by the state in which it is sold provides true financial reimbursement.

There are abundant examples of families whose travel plans are interrupted due to weather, cruise ship breakdowns or car accidents. Yet only one in three travelers buy travel insurance. Typically, the plan combines three forms of insurance: trip cancellation/interruption, loss and/or damage of personal effects and emergency medical.

Travel insurance may include, or bundle, several forms of coverage and services into one policy, such as the these:

  • Financial reimbursement for ticket costs due to trip cancellation or interruption arising from conditions such as illness or bad weather, as well as costs due to baggage loss and/or delay
  • Costs for medical care and/or evacuation in the event of illness or injury while traveling
  • Additional services such as a hotline to call when in need of a doctor and that can be used to arrange accommodations and to contact your family or seek other assistance in case of emergency

When traveling in a foreign country, there's always a chance you will require medical care, so a plan that offers access to local legal and medical assistance can be a real asset.

When shopping for travel insurance, compare policy coverage, benefits and prices, and ask for a list of what is included and what is not. I would recommend consulting the US Travel Insurance Association website to learn more and to find reputable providers.

Before you travel, review your health insurance and homeowners and auto policies to see what these cover when you travel. Many people find that loss of personal property is covered by their homeowners or auto insurance, by rental car insurance or even by their credit cards. But they may not know that their medical insurance does not apply in international locations, and there may be no coverage at all for medical evacuation.

Travel insurance generally costs from 4 percent to 8 percent of the total trip. Cost is based on the length of trip, destination and age of policy holder. But if you do the research on what coverage your other policies provide, you may save yourself some money.

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.

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