Insurance Can Save the Day When Vacation Goes South

In January, when Robert Johnson booked an $8,000 trip to China for himself and his wife, he spent an extra $495 on a travel insurance policy. It turned out to be a smart choice.

Travel insurance provides short-term coverage for a wide array of risks, including the risk of having to cancel at the last minute and lose your deposit, the most common type of claim. It also insures against the risk of having an accident in a rental car, losing baggage or having a major medical emergency in a country that doesn’t accept your insurance plan.

As it happened, Johnson, a 77-year-old Phoenix resident, began suffering nagging urinary tract infections a few weeks after booking the trip. Shortly before the May departure date, Johnson’s doctor advised him that it was not a good time to be visiting a country that’s short on medical facilities.

Johnson canceled the trip and got back all of the $8,000 that he’d paid, most of it coming from the insurance.

“I always wondered if they’d run you around if you had to make a claim,” Johnson said. Instead, the insurer provided a medical form and covered all the nonrefundable costs -- even the $150 he’d paid to get a Chinese visa. “I was surprised at how easy it was.”

Since the Sept. 11, 2001, terrorist attacks, the sale of travel policies has soared. Travel insurance is now purchased by about one-third of all travelers who book their trips through travel agents, compared with less than 10% in 2001, according to the United States Travel Insurance Assn., a trade group.

The surge in popularity appears to have two root causes, experts said. The terrorist attacks made travelers aware of personal safety considerations that might cause them to cancel a vacation. Meanwhile, travel agents are increasingly recommending the policies because it has become tougher to get deposits back.

“Years ago, you could get cruise lines to waive a cancellation penalty if the person had a reasonable excuse,” said Marie Liuzzi, manager of the cruise department at Archer Travel in Montrose. “Now, getting a penalty waiver is almost an impossibility.”

Although travel insurance may be unnecessary for short and inexpensive trips, it can save consumers a bundle if they unexpectedly have to cancel a costly vacation, added Ron Archer, owner of Archer Travel.

“Unlike auto insurance, it’s not mandatory. But like life insurance, it’s sure handy to have when you need it,” he said.

Not all claims go as smoothly as Johnson’s, experts acknowledge. That’s partly because the policies can exclude coverage for preexisting medical conditions and they seldom cover cancellations that aren’t related to a doctor-verified malady or death. It’s a rare policy that will pay off simply because the consumer changed his or her mind.

“Every once in a while, you’ll get a claim that says, ‘I didn’t feel like going,’ ” said Emily Porter, spokeswoman for Access America, a Richmond, Va-based travel insurer. “That’s not covered.

“A rule of thumb with all insurance is that it covers you for unforeseen or unexpected events,” she said. “If you know that something is going to happen, insurance doesn’t cover it.”

What is covered by a travel policy depends on the policy purchased. Commonly, comprehensive travel policies cover unexpected cancellations like Johnson’s, as well as trip interruptions caused by illness, storms or a death in the family. Many policies cover the cost of an overnight stay after a missed connection and the cost of replacing lost luggage. They often provide insurance coverage for your rental car too.

Most policies also absorb the cost of emergency medical care overseas and can even pay to have the policyholder airlifted out of a remote location to an appropriate hospital. If a traveling companion needs to stay by the policyholder’s bedside, he or she might also be covered, Porter said.

The details of what’s covered and what’s not are always shown in the policy, Porter added. Consumers may not want to read these long legal documents, but because terms of the policies can vary so dramatically, Porter said, consumers would be wise to buckle down and do it anyway.

“There’s not one master plan,” Liuzzi said.

Liuzzi, who says about 75% of her customers buy travel protection, notes that those who have existing medical conditions, such as high blood pressure or diabetes, should be particularly careful to read the terms of the deal. That’s because some policies will exclude coverage for losses resulting from an existing medical condition, but others will cover it as long as that condition has been stable for a set period -- anywhere from 30 to 180 days. And other policies will cover an existing ailment but may provide payment in future travel credits rather than cash.

The downside to travel insurance? It’s not cheap. Policies cost 4% to 10% of the cost of the trip, Porter estimated. The price varies based on the age of the traveler, the cost of the trip, the destination and the coverage.

In the end, the decision about whether to buy travel insurance boils down to a personal assessment of risk, Archer said.

“It’s like buying earthquake coverage for your house,” he said. “For some people, it provides fairly inexpensive peace of mind. But if you don’t feel that the risk is great and the cost of protection is not warranted, you don’t buy it.”

*

Kathy M. Kristof can be reached via e-mail at kathy .kristof@latimes.com. For previous columns, visit latimes.com/kristof.