How Does Travel Insurance Work?
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While every traveler hopes for the best when going on a trip, it's possible for unexpected outcomes to ruin some or all of your vacation. Travel insurance helps in those unfortunate situations by covering the necessary expenses to get you back on the right track.
But how does travel insurance work, how do you buy coverage, and is it a good idea for your next trip? Let’s find out.
What is travel insurance?
Travel insurance protects against financial losses and other risks from unexpected events that occur when traveling. Policies cover the expenses and inconveniences incurred from delayed flights, canceled reservations, lost or delayed luggage, injuries and illness.
You can buy policies that cover one reservation, an entire trip or a specific period of time. Policies can provide protection for a single person or a whole family. Prices vary based on your age, protected items, coverage limits and duration of coverage.
You don’t always have to buy a policy out-of-pocket, though. Some travel cards include built-in travel insurance as a perk. Keep in mind, however, that these policies and their coverage limits vary widely, so it pays to be mindful of what’s covered by any given travel card.
» Learn more: How to find the best travel insurance
Types of travel insurance coverage
Now that we know what it is, how does trip insurance work? There are many types of policies and coverage levels available, depending on your budget and what risks you want to cover.
So what is travel insurance for? Typically it will cover some or all of the following situations:
Trip delay. If your flight or other transportation has delays, you’ll receive compensation to cover food, lodging and other related expenses.
Trip interruption/cancellation. When your trip is interrupted or canceled for a covered reason, it provides financial assistance to make other arrangements to continue your trip or go home early.
Baggage delay. Covers the cost of reasonable clothing, toiletries, medication and other necessary items until your bag arrives.
Lost or damaged baggage. Pays to replace lost or damaged items, including both the luggage itself and personal effects that were in the luggage.
Rental car damage. Commonly called an auto collision damage waiver, this covers the cost to repair or replace a damaged or stolen rental car. Some policies also cover the lost income of the rental to the car agency while it’s being repaired.
Injury or sickness. If you get injured or sick during your trip, this benefit pays for necessary medical care. Depending on the coverage you choose, this benefit may be primary or secondary to your existing medical insurance.
Emergency assistance and transportation. Pays to transport you to the nearest facility that offers adequate medical care to treat your illness or injury. In some cases, this may mean transporting you back to your home country.
Keep in mind that many travel insurance policies do not provide protection for COVID-related situations or pre-existing medical conditions.
» Learn more: Trip cancellation insurance explained
How to use your travel insurance
Travel insurance works like most insurance policies. You purchase coverage for a period of time to protect against certain risks. When a covered event occurs, you file a claim with the insurance company to request payment or reimbursement for financial losses.
In most cases, travel insurance covers only prepaid or non-cancelable reservations. If you are able to cancel your reservations for a full refund, you should cancel them directly with that company as soon as possible. Additionally, most travel insurance policies do not cover reservations booked with airline miles or hotel points.
When you submit a claim, you’ll need to provide documentation for your loss. For example, you should document the cause of the issue (e.g., flight delay or cancellation) and provide copies of your receipts to substantiate your claims. Since there are many different types of losses that could occur, your claims process may vary by company and type of loss.
» Learn more: How do travel insurance claims work?
How to get travel insurance coverage
For travelers interested in getting a travel insurance policy, there are three primary ways to obtain coverage — purchase a standalone policy, use travel card benefits, or add on coverage when booking a trip.
Purchase a travel insurance policy
Many companies sell travel insurance as standalone policies that vary in length from a single trip to a full year. Your policy can cover a single person or an entire family. Policies range from those that offer basic coverage to others that are very robust and cover almost every possibility. Coverage options start from around $20 per trip.
For frequent travelers, it may make sense to purchase a full year of coverage instead of buying a policy for each individual trip.
» Learn more: When you don’t need to buy travel insurance
Access via travel card benefits
Many travel cards include protections that cover issues with your flight, bags and other aspects of your trip. These protections are included at no extra charge, and their coverage levels vary from card to card. You may have travel protections from some of the travel cards that are already in your wallet.
Here's a sample of the coverage available from some popular cards:
• Trip delay: Up to $500 per ticket for delays more than 12 hours.
• Trip cancellation: Up to $10,000 per person and $20,000 per trip. Maximum benefit of $40,000 per 12-month period.
• Trip interruption: Up to $10,000 per person and $20,000 per trip. Maximum benefit of $40,000 per 12-month period.
• Baggage delay: Up to $100 per day for five days.
• Lost luggage: Up to $3,000 per passenger.
• Travel accident: Up to $500,000.
• Rental car insurance: Up to $75,000.
• Trip delay: Up to $500 per ticket for delays more than 6 hours.
• Trip cancellation: Up to $10,000 per person and $20,000 per trip. Maximum benefit of $40,000 per 12-month period.
• Trip interruption: Up to $10,000 per person and $20,000 per trip. Maximum benefit of $40,000 per 12-month period.
• Baggage delay: Up to $100 per day for five days.
• Lost luggage: Up to $3,000 per passenger.
• Travel accident: Up to $1 million.
• Rental car insurance: Up to the actual cash value of the car.
• Trip delay: Up to $500 per trip for delays more than 6 hours.
• Trip cancellation: Up to $10,000 per trip. Maximum benefit of $20,000 per 12-month period.
• Trip interruption: Up to $10,000 per trip. Maximum benefit of $20,000 per 12-month period.
• Lost luggage: Up to $3,000 per passenger.
• Travel accident: Up to $500,000.
• Rental car insurance: Up to $75,000.
Terms apply.
• Trip delay: Up to $500 per ticket for delays more than 12 hours.
• Trip cancellation/trip interruption: Up to $2,000 per person.
• Lost luggage: Up to $3,000 per trip.
• Rental car insurance: Primary coverage, up to $75,000.
» Learn more: The best credit cards for travel insurance benefits
Get add-on protection for your trip
Some companies offer travelers the option of purchasing insurance when booking a trip. However, they are generally limited in nature and usually cover only that specific reservation.
Below is an example of an add-on policy proposed by Delta Air Lines for a flight from Los Angeles to Salt Lake City for a refundable, first-class fare.
In most situations, these add-on policies only make sense for a large financial commitment, such as a cruise or a premium cabin flight. Even then, you should compare how the add-on insurance works versus buying a general policy that could cover your entire trip.
If you’re interested in buying travel insurance
Now that we've answered "how does travel insurance work," you can see how it can be a smart way to protect your trip in case an unexpected problem occurs. Coverage limits and benefits vary by company and budget, so shop around for the best deal. Review your travel card benefits to ensure that you’re not paying for coverage that you’re already getting for free. And, if you have a claim, document everything and compile your receipts to request reimbursement right away.
Insurance Benefit: Trip Delay Insurance
Up to $500 per Covered Trip that is delayed for more than 6 hours; and 2 claims per Eligible Card per 12 consecutive month period.
Eligibility and Benefit level varies by Card. Terms, Conditions and Limitations Apply.
Please visit americanexpress.com/benefitsguide for more details.
Underwritten by New Hampshire Insurance Company, an AIG Company.
Insurance Benefit: Trip Cancellation and Interruption Insurance
The maximum benefit amount for Trip Cancellation and Interruption Insurance is $10,000 per Covered Trip and $20,000 per Eligible Card per 12 consecutive month period.
Eligibility and Benefit level varies by Card. Terms, Conditions and Limitations Apply.
Please visit americanexpress.com/benefitsguide for more details.
Underwritten by New Hampshire Insurance Company, an AIG Company.
Insurance Benefit: Baggage Insurance Plan
Baggage Insurance Plan coverage can be in effect for Covered Persons for eligible lost, damaged, or stolen Baggage during their travel on a Common Carrier Vehicle (e.g., plane, train, ship, or bus) when the Entire Fare for a ticket for the trip (one-way or round-trip) is charged to an Eligible Card. Coverage can be provided for up to $2,000 for checked Baggage and up to a combined maximum of $3,000 for checked and carry-on Baggage, in excess of coverage provided by the Common Carrier. The coverage is also subject to a $3,000 aggregate limit per Covered Trip. For New York State residents, there is a $2,000 per bag/suitcase limit for each Covered Person with a $10,000 aggregate maximum for all Covered Persons per Covered Trip.
Eligibility and Benefit level varies by Card. Terms, Conditions and Limitations Apply.
Please visit americanexpress.com/benefitsguide for more details.
Underwritten by AMEX Assurance Company.
Insurance Benefit: Car Rental Loss & Damage Insurance
Car Rental Loss and Damage Insurance can provide coverage up to $75,000 for theft of or damage to most rental vehicles when you use your eligible Card to reserve and pay for the entire eligible vehicle rental and decline the collision damage waiver or similar option offered by the Commercial Car Rental Company. This product provides secondary coverage and does not include liability coverage. Not all vehicle types or rentals are covered. Geographic restrictions apply.
Eligibility and Benefit level varies by Card. Terms, Conditions and Limitations Apply.
Please visit americanexpress.com/benefitsguide for more details.
Underwritten by AMEX Assurance Company. Car Rental Loss or Damage Coverage is offered through American Express Travel Related Services Company, Inc.
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