Travel insurance makes sense if you want to protect the amount of money you've laid out for your vacation. But no one can blame you if you're hesitant to add another expense to your travel budget after paying for airfare, hotels, meals and activities. Still, if you can't afford to lose that money if something unexpected happens, travel insurance can be a smart investment.

The average insured trip cost is about $5,453, according to Squaremouth, a travel insurance comparison website. The cost for travel insurance was $252, on average. You may be planning to spend much more than that for your dream vacation, or you may be going on a long weekend get-away that costs much less.Typically, the cost of travel insurance is 5% to 6% of your trip cost.

Here are some scenarios where travel insurance can pay off.

What Travel Insurance Covers

Travel insurance compensates you for trip costs and money you spend due to unforeseen events before and during your trip.

Trip cancellation travel insurance

Before you're even able to finish packing your sunscreen and swimsuits, an unforeseen circumstance could force cancellation of your trip—for instance, if a tour operator goes out of business, you become ill or a family member dies. Travel insurance that includes trip cancellation coverage will reimburse the pre-paid, non-refundable costs of your trip in these kinds of situations.

Furthermore, if you, a family member or a travel companion becomes sick or is injured while traveling, the policy's trip cancellation feature typically would reimburse you for the unused part of the trip. The trip cancellation benefit could even kick in if you, a family member or a travel companion dies while traveling.

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"Cancel for any reason" travel insurance

Note that you can make a claim using trip cancellation coverage only if your reason for canceling is listed in the policy as an acceptable reason. To broaden cancellation coverage, there's an add-on known as "cancel for any reason" travel insurance (CFAR).

CFAR coverage lets you cancel a trip for any reason and receive partial reimbursement, as long as you cancel at least 48 hours before your scheduled departure. For instance, maybe you've opted to stay home so you can attend your high school reunion after all. CFAR coverage typically adds 50% to your standard travel insurance policy cost. Reimbursement is generally 75% of the trip money you lose.

Travel medical insurance for emergencies

Whether you're canoeing in Argentina or taking a safari trip in Zambia, a medical emergency can certainly put a big dent in your travel mojo. It also can put a big dent in your budget.

Many U.S. health plans offer no coverage outside the country. That means you have to pay for your medical care if you get injured or become ill during your trip—and if you think it's not likely, think again. Allianz, a travel insurance company, says it receives more than 4,000 calls a year from customers who are experiencing a medical emergency during a trip.

Travel medical insurance covers costs for doctor and hospital bills, ambulance service, medicine, X-rays and lab work, up to the limits in your policy.

Medical evacuation travel insurance

Imagine needing to be airlifted off a mountainside in Switzerland after a hiking mishap, spending a few weeks in a Colombian hospital recovering from a heart attack or requiring a flight back home from Jamaica to treat a broken hip.

It can cost an estimated $15,000 to $200,000 to be transported by helicopter or ambulance to a nearby health care facility for treatment of an injury or illness somewhere in the world, according to Allianz. That does not include the cost of the treatment itself.

Medical evacuation travel insurance covers the expense of being taken to the closest health care facility overseas that's equipped to treat you, and it also may pay for someone to be flown back to the U.S. for advanced medical attention. Along with medical evacuation, a policy can cover the repatriation, or transfer, of a traveler's remains to the U.S.

For example, the TripProtector Preferred plan from HTH Worldwide is one of the most generous in the industry, providing $500,000 for emergency medical expenses and $1 million for emergency medical evacuation.

Travel insurance for missed connections

Missing a connection while you're traveling can be a costly hassle. Missed connection travel insurance reimburses you if you miss a departure for a reason listed in the policy.

This would compensate for a travel delay of, say, three, six or 12 hours caused by something like a mechanical failure on a plane or a storm that prevents a cruise ship from docking on time. The compensation typically would cover the cost of catching up to a tour or cruise.

For example, the Classic plan by TravelSafe provides $2,500 after three hours of a missed connection.

Travel delay insurance

Travel delays are a headache for many travelers. A policy with travel delay insurance can reimburse restaurant and hotel expenses when a flight is delayed due to a reason listed in your policy, for instance bad weather or a mechanical problem. The daily amount of coverage usually ranges from $150 to $200.

For example, Trawick International's Safe Travels Voyager plan provides travel delay coverage of $150 a day, up to $2,000 total, after five hours of delay.

The travel delay benefit could also cover costs for you to catch up to a destination or go back home, or even may reimburse you for unused trip expenses that are pre-paid and non-refundable.

Baggage insurance

If your luggage is lost, stolen or damaged during a trip, a travel insurance policy with baggage insurance can reimburse you. Homeowners insurance or renters insurance policies can also cover theft of your baggage and belongings.

Baggage insurance also extends to your personal possessions, so if your backpack gets stolen, you can file a claim. Be aware that baggage insurance compensates you for the depreciated value of your belongings and not the amount to replace your stuff with new items. Also, there are exclusions and caps on certain items.

In addition, some travel insurance plans cover baggage delays. This coverage can pay for items you need to buy, such as clothing and toiletries, to tide you over while you're waiting for your luggage to catch up with you. Note that baggage delay benefits come with a specified waiting time before benefits apply.

Here are some examples of baggage delay coverage from some of the best travel insurance companies in Forbes Advisor's ratings:

  • HTH Worldwide TripProtector Preferred Plan: $400 after a five-hour delay
  • John Hancock Insurance Agency Gold plan: $500 after a five-hour delay
  • Seven Corners RoundTrip Elite plan: $600 after a five-hour delay
  • Trawick International Safe Travels Voyager plan: $600 after a 10-hour delay
  • USI Affinity Travel Insurance Select Elite plan: $500 after a five-hour delay

All in all, travel insurance is a small cost relative to the trip costs you can protect—especially when traveling uncertainties and surprises abound.

What Does Travel Insurance Not Cover?

Travel insurance generally doesn't cover losses due to reasons and circumstances that are within your control. It's designed to safeguard your trip investment if unexpected circumstances derail your plans.

For instance, trip cancellation benefits only apply if you cancel due to reasons listed in your policy, which are unforeseen events beyond your control. That means you won't be eligible to file a standard trip cancellation insurance claim if you simply change your mind about going on your trip. For that, you would need CFAR coverage.

You should review the fine print of your travel insurance policy and familiarize yourself with what your policy doesn't cover because all travel insurance plans have exclusions.

For example, medical claims exclusions often include things like:

  • Elective procedures
  • Mental health care
  • Participation in adventure or extreme activities
  • Physical therapy
  • Routine physicals and routine dental exams
  • Routine pregnancy

Also be aware that travel insurance policies generally won't cover your losses for a hurricane unless you purchase travel insurance before the storm is named.

Related: What travel insurance does not cover

When is Travel Insurance Worth It?

Generally, travel insurance is worth considering if:

  • Your trip cost is much more than you can afford to lose
  • You are traveling internationally
  • You are traveling to a remote area with limited nearby health care facilities
  • You are traveling to a hurricane-prone country
  • You have lots of pre-paid, non-refundable tours, day trips and activities planned
  • Your trip involves connecting flights or multiple destinations
  • You want to be compensated for Covid-related cancellations and medical issues when traveling abroad
  • You want to be partially reimbursed if you decide to cancel your trip or return home early for any reason

Related: Best Covid travel insurance plans

When Is Travel Insurance Not Necessary?

You generally don't need travel insurance if you're not putting down large non-refundable trip deposits, or if your health plan will cover you at your destination.

For example, travel insurance may not be necessary if you're taking a cheap, domestic trip. If you're going on a long-weekend getaway and staying with friends with plans to see a show and do some shopping, you likely won't have a lot of pre-paid, non-refundable expenses. And your U.S. health insurance can cover any medical costs if you get sick or injured during your trip. In that case travel insurance may not be needed.

You also may not need travel insurance if your credit card benefits provide travel insurance coverage. It's wise to check with your credit card company before planning a trip so you're aware of any applicable travel coverage.

Also keep in mind that some baggage insurance is secondary, which means you first file a claim with your airline or homeowners insurance. You may want to skip baggage insurance if you have secondary baggage insurance, you're not packing a lot of expensive items and have a direct flight.

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