Travel: To insure or not?

Don’t buy travel insurance, says Consumer Reports. Do buy travel insurance, say consumer advocates Clark Howard and Ed Perkins. Don’t buy travel insurance, says the Consumer Federation of America. Do buy it, says your travel agent.

In a database of news articles over the last year about travel insurance, many advised people to buy it, while many others said skip it. With such conflicting information, what should you do?

It has become a big issue. More than $1.3 billion is spent annually on travel insurance, according to the most recent figures from the U.S. Travel Insurance Assn. Typical coverage costs 4% to 8% of the cost of the trip, based on the length of the trip, the destination, the traveler’s age and the type of coverage. So, coverage for a $3,000 trip might cost $120 to $240.

The biggest problem for consumers is understanding the components of the insurance.

First, travel insurance often includes trip-cancellation insurance. It reimburses you for money lost on nonrefundable parts of a trip, such as hotel deposits and a prepaid cruise. It might be used when you have to delay, cancel or cut short the trip for medical reasons, for example.

Second, travel insurance could reimburse you for unexpected extra costs incurred because of transportation hassles, such as canceled flights, flight delays and lost luggage. It would reimburse for a hotel room stay near the airport, for example. This is a minor part of a package policy.

Third, it could provide medical insurance coverage while you’re away from home, if your medical insurance doesn’t cover hospital costs in foreign countries, for example. And it could pay for expensive medical evacuation — by medical helicopter, for example — if you’re in a place with inadequate facilities.

The first question to ask yourself about travel insurance is whether something trip-related could land you in financial disaster. Insurance has the most value when it protects you from financial ruin, not minor annoyances.

For trip-cancellation insurance, by far the most popular coverage, the travel insurance industry likes to ask, “Can you afford to lose the $5,000 you spent on a vacation if you have to cancel it?”

That’s a bit misleading because you already planned to “lose” $5,000 by paying for the trip. So of course you can afford it. What you really lost was the experience of the trip. Besides, you can often get back at least part of the money you spent on a trip.

Also, don’t give much weight to such throw-ins as plane-crash insurance. Your life insurance policy should already cover your needs no matter how you die. And travel-hassle expenses are either too small to insure or are already covered by your homeowner’s policy or credit card benefits. Airlines reimburse you for lost bags.

Still, you might decide travel insurance is for you. Buying travel insurance for, say, $200 might give you peace of mind and seem worthwhile if you can recoup thousands of dollars.

Here are questions to ask yourself.

• What am I afraid of?

Identify specific things that could go wrong and affect your trip. Then evaluate the chances of the bad things happening and what it would cost you. For example, if a sickly parent might need you — or might die — just before or during your trip, travel insurance might be worthwhile.

• What coverage do I already have?

You don’t want to pay twice for coverage. Check out details from your health insurance carrier, homeowner’s insurance, the credit card you used to pay for the trip and an automobile club if you’re a member.

Seniors should be aware that Medicare provides no coverage abroad, unless you have one of the more robust Medicare supplements that cover most of the cost of medical services overseas. Many health plans don’t cover medical evacuation in foreign countries.

• How expensive is my trip?

Nobody likes to lose money, but assess the cost of the vacation compared with how much money you have. The more you have at stake, the more insurance might be worthwhile.

• How much of my trip is prepaid and nonrefundable?

Know the details on how much money you get back if you need to cancel, delay or cut short your trip.

Once you’re clear about why you are buying travel insurance, here are tips, developed with help from Peter Evans, executive vice president of InsureMyTrip.com, and Brad Finkle, president of the U.S. Travel Insurance Assn.

• Buy soon after you book the trip. “Buy these policies as close to the trip deposit as possible,” Evans said. “That’s paramount.”

There are several reasons to do this. Primarily, you want the most coverage you can get for trip cancellation, which means including the most number of days between booking the trip and leaving for the trip.

Insurance also has short windows of time, seven to 21 days after an initial deposit, to get such benefits as a waiver of preexisting medical conditions, tripsupplier bankruptcy protection and terrorism protection, Evans said.

• Don’t necessarily buy from your travel supplier.

You might get better value from a third-party insurer, such as InsureMyTrip.com, QuoteWright.com and TravelInsurance.com. Prices might be roughly the same, but if your cruise line goes bankrupt, not only will you lose the cruise but the insurance you bought also might be worthless.

The same goes for buying from a travel agent that could go belly up. But seniors might consider buying through a reputable cruise line or tour operator if they don’t use age ratings and rates are significantly cheaper.

• Read the fine print.

Identify the bad things you want to protect against and make sure they are covered. For example, if you’re worried about trip cancellation or interruption because of terrorism, make sure that’s included in the policy.