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Pack Your Bags, Hedge Your Bets

By Laurie Berger, Special to The Times

Los Angeles Times - January 22, 2006, Travel Section

Trip insurance helps when the unforeseen unravels travel plans. Just read the fine print.

MOST people wouldn't buy a $20,000 car without insurance to guard against loss or damage; why do travelers leave home without protecting a $10,000 family vacation?

Mainly because they don't think they need trip insurance.

But that's changing after an unprecedented trio of troubles — airline bankruptcies, hurricanes and terrorism — snarled travel plans for thousands last year.

About one of every three travelers bought insurance in 2005, almost double the number who did before Sept. 11, 2001. Last year, insurers paid out $14 million in claims to consumers whose trips were washed out by hurricanes alone.

Who is buying? Seniors worried about becoming ill aren't the only ones; much of the new interest comes from young families with tight budgets and small children. To meet consumers' growing need for protection, travel insurers now cover a range of problems: airline default and tsunamis, medical evacuation and concierge services.

But those who have shopped these plans — or have had a claim denied — know they're filled with more holes than Swiss cheese. Plus, it takes a lot of patience to sort through the policies and the fine print that comes with them.

Here are answers to the most frequently asked questions:

Question: Am I a good candidate for insurance?

Answer: If you can't afford to lose money, travel insurance is a must. The best candidates are those with medical problems, young children or elderly parents. Travelers headed to high-risk areas or booked with suppliers that have strict nonrefundable policies — such as airlines and cruise lines — should also consider insurance.

Question: What does insurance cost?

Answer: A good yardstick is 4% to 8% of the total trip cost. The older you are, the higher the premium. On a $1,500 trip, the average cost would be an additional $60 to $120 per person.

Question:Which are the most popular policies?

Answer: About 90% of the policies sold are trip-cancellation and trip-interruption insurance. They cover the most frequent reasons for not taking or finishing a trip.

If, for example, you're forced to cancel because of a sick baby or a death in the family — or if illness befalls you on the road and you have to go home — your deposits would be refunded.

The big caveat: These policies pay only for "covered" events, which vary by company. For example, acts of war, psychological breakdowns or elective surgery are not covered. You must read the fine print to know what's covered.

Question: Will travel insurance cover medical expenses?

Answer: Yes. You can buy separate policies that cover medical and dental costs. These are popular because most U.S. health insurance policies do not cover travelers' overseas medical expenses, which can be substantial. A word of caution: Such policies usually pay only for you to go to the nearest hospital. But again, check the fine print.

Question: Will I be covered for a pre-existing condition?

Answer: This is one of the most misunderstood of all policy provisions, according to Ansell. Generally speaking, pre-existing conditions are waived if you're medically stable and buy the insurance during a specified "grace" period. Again, there are many exclusions, so read the fine print and ask questions if you don't understand.

Question: Will travel insurance cover me if I'm forced to cancel because of airline bankruptcies, terrorism or hurricanes?

Answer: It will cover you for incidents such as terrorism or hurricanes if you purchased the policy before the incident occurred. Most insurers, except for Connecticut-based Travel Insured won't protect you against financially troubled suppliers, even if they haven't declared Chapter 11. Each company publishes a list of "noncovered" suppliers in its terms and conditions.

Question: What if I'm just scared to go?

Answer: Travel insurance kicks in only when there's a government-issued mandate and travel to the destination ceases. If you're simply afraid to go, you're not covered.

Travel Safe, however, just announced a new "cancel anytime policy." It refunds 50% to 90% of prepaid costs, depending upon the plan, if you decide not to go, regardless of the reason.

Question: Will rates go up after all the disasters we just had?

Answer: There's enough competition in this business to hold the line on prices, despite the recent barrage of claims. "Premiums have been within 2% of each other for the past two to three years".

Question: When I filed a claim, it was denied. Why?

Answer: Chances are you filed a claim for a reason that was not covered or didn't buy insurance within the grace period. To qualify for a waiver of pre-existing conditions, for example, you must purchase the policy within 14 days of the first payment you make for the trip. All the more reason to read the fine print. There are lots of exceptions.

Question: What's the difference between third-party insurance and the policies sold by cruise lines and tour operators?

Answer: The policies sold by third parties and travel agencies are identical. But travel agencies usually offer just one company's policy. It's best to comparison shop. Several sites, including http://www.TripInsuranceStore.com, make it easy.

Airlines, cruise lines and tour operators sell two types of protection. The first is a "cancel-anytime" waiver that gives travelers more flexibility than regular insurance. It allows them to cancel for "uncovered reasons" — if for example, they catch a cold or are scared to fly because of terrorist threats.

The second type is an insurance policy that looks and feels like those of third-party companies and often bear the name of those companies. But they're not the same, Evans says.

They're tailored for specific travel suppliers, much as health insurance plans are customized for different employers. They do not protect you if that cruise line, tour operator or airline goes belly up. For maximum flexibility and protection, it may pay to buy travel insurance and cancellation waivers.

Question: How do I find a reputable travel insurance company?

Question: Whom do I call if I have a problem with a travel insurance company?

Answer: Travel insurance, like all other insurance, is regulated by the states. If you think your claim has been wrongfully denied, appeal it to the insurance company. If you don't get satisfaction, call your state's insurance commissioner. In California, that's John Garamendi, (800) 927-HELP (927-4357), http://www.insurance.ca.gov.

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