What are the common mistakes or misconceptions that surround travel insurance? Here is a list of the biggest and the most frequent:
Pre-existing medical conditions - the biggest pitfall out there. Up to 25% of all travel insurance claims are due to pre-existing medical conditions. Overcome this by finding a plan that waives pre-existing medical conditions.
Qualifying for pre-existing medical conditions waiver - biggest pitfall is not insuring the full, pre-paid value of your trip. Rounding your trip cost down will, in most cases, disqualify you for the waiver. Don't round your trip cost down!
Covered Reasons - Trip cancellation, trip interruption, and travel delay are "named peril" coverages. That means they only cover the specific reasons that the insurance company outlines in their policy. If it isn't listed than it's not covered. And all reasons are subject to the policy exclusions. The proper way to analyze trip cancellation/interruption coverage is to:
- read the covered reasons, only those reasons are covered;
- read the exclusions to see if they modify the covered reason - exclusions trump covered reasons;
- read the benefits because that is what the insurance company will pay.
Pre-existing Medical Conditions and Family Members - unless you've qualified for the waiver of pre-existing medical conditions then most policies will exclude pre-existing medical conditions for all "Family Members" whether or not they are traveling. Now you may know the medical condition of all of your "Family Members" but do you know the medical condition of your traveling companion's "Family Member"? Under most plans the pre-existing medical conditions of everyone are excluded from coverage unless the plan provides a waiver and you qualify. There are some exceptions to this so read your coverage carefully.
Foreseeability and Pre-existing Conditions - travel insurance policies require all losses to be unforeseeable at the time that you purchased your policy. Just because you've qualified for the pre-existing conditions waiver doesn't mean that they will cover all losses caused by pre-existing conditions. If your loss could have been reasonably foreseen at the time you purchased your policy than it probably won't be covered.
Family Members - trip cancellation and interruption coverages limit coverage to illness, injury, or death of a "family member". Each company defines "family members" differently. Read the definition carefully. If you are traveling with a travel companion be careful as some plans include their relatives as part of your "family" and some limit coverage to only your companion. Might not sound like a big difference, but if your companion cancels due to the death of one of their "family members" you won't be covered.
Secondary Coverage - not really a pitfall, but it is something that you have to understand. Secondary coverage means that you have to first submit a claim to your permanent insurance policies before the travel insurance company will consider the claim. That means that if you have a medical claim then you have to submit it to your health insurance company first or if you have a baggage claim than you have to submit it to your home owners insurance company.
Protection Plans and Cancellation Waivers - plans that look like travel insurance but really aren't. Be very careful with these and avoid them at all costs. They are called by different names, Protection Plans, Cancellation Waiver, etc, but what they have in common is that they are not insurance.
Advertising pieces (including web sites) - travel insurance or protection (whatever they might call it) advertising pieces that are vague and don't show conditions, limitations, and exclusions more than likely indicates a problem. Insurance advertising laws set minimum standards; among them are requirements to show plan limitations and restrictions. Most companies are compliant with the standards and will also provide you with a sample policy prior to purchase. Stay clear of sites that won't provide you with a copy of the policy or that tell you that you'll be provided that information after you purchase the policy - after the purchase is the wrong time to understand what you're buying. Avoid plans or web sites that have any one or more of the following danger signs:
- vague description of coverage,
- failure to identify the name of the underlying insurance company,
- an unwillingness to provide a copy of the policy or contract prior to the purchase,
- web sites that don't provide a phone number,
- payment made by future travel credits,
- premium or plan cost much lower than legitimate plans.
Remember the old adage if it sounds to good to be true than it probably isn't.