Travel insurance protects the policyholder for loss arising because of unforeseen events during travel. Coverage, extent of coverage, destination clauses, pre-existing health conditions coverage are some factors one should check before buying one such cover.
J.R.R. Tolkien once said, “Not all those who wander are lost.” Today, if one travels without travel insurance, he will be financially lost. There are several things that can go wrong when one travels. For instance, bags can be stolen, flights can get delayed or health problems can come up. Travel insurance helps in covering these risks and compensates the policy holder for loss arising because of unforeseen events during travel. While it is not a must to have travel insurance for domestic travel, it is highly recommended to have one during overseas travel. There are several products available in the market and one must look into the finer details before choosing a travel insurance policy. Here are the top 5 things to be evaluated before buying a travel insurance policy:
1. What is actually covered and what is not: While all travel insurance policies may look similar on the face of it, the finer details of what is covered and what is not can make a huge difference. For example, medical coverage while travelling abroad is an important component. Although policies may generally offer emergency medical expenses, the various heads under this may vary across policies. Compensation for flight delays, loss of baggage and loss of documents are generally covered by all policies. Accidental death or disabilities due to accidents are not offered by all policies. This becomes important, especially if one is going on an adventure holiday. Some policies expressly exclude this. The features of a policy may suit one individual, while it may not be appropriate for another. One should therefore not only opt for a policy with maximum coverage, but also one which suits individual conditions the best.
2. Destination coverage: Travel insurance companies offer policies which may either have global coverage or have specific geographical coverage. Choosing a policy with global coverage is always safer, as there is no risk of rejection. However, there may be sub clauses and exceptions to this. Further, sub limits on the coverage amount may be different for different destinations. If the travel is to a destination which is considered to be a high risk area, the premium may be higher than normal or the restrictions may be more severe. It is therefore recommended to compare this feature among policies.
3. Duration of coverage: Policies can be either a single trip policy or an annual multi trip policy. The frequency of travel should determine the choice of the policy. Check how many consecutive days abroad will be covered under the policy. As the method of calculation of the number of days can be unclear, it is better to opt for a period which is slightly higher than the travel period. This is because the policy will become invalid even if the stay exceeds by a day from what was stated in the policy documents. Alternately, some policies offer a feature of extending the policy, in case the duration of the trip gets extended. Choosing a policy with this feature can help in saving premiums.
4. Extent of coverage: In addition to the various heads which are covered in the policy, one must also check how much will be the coverage for each head. This means there will be a limit on the claims imposed, depending on what is being claimed. Usually, there is a pre-set coverage amount specified for the various benefits. For example, a policy may specify the maximum coverage amount for loss of checked in baggage to be USD 500 or the maximum health cover to be USD 100,000. This of course varies from provider to provider. Evaluate which plan suits you the best and choose the one which offers the maximum extent of coverage.
5. Pre-existing health conditions: Insurers generally do not cover pre existing conditions of the policy holder. However, some companies offer coverage with certain caveats and conditions. Policy holders are required to declare the pre existing conditions while purchasing the policy. While it may be tempting to hide certain details, it must be remembered that in the event of a claim, insurers can demand access to health records. Therefore it is recommended to disclose all details at the initial stage. Compare this clause among various policies. If the policy is silent on this clause, it is better to enquire the same before purchasing the policy.
Any insurance costs money and therefore purchasing travel insurance entails premium outflow. However, it is better to be safe than sorry, and travelling without adequate insurance is foolishness. It is important to compare the various options available, look up all the relevant features of the policies and select the one which is provides the most appropriate coverage.
The author regularly writes on personal finance and financial planning. She is associated with www.gettingyourich.com, a Mumbai based financial planning firm.