For most families, taking a vacation is a wonderful treat. You plan for it, save for it, anticipate it, enjoy it, and live off its memories for years to come. There’s a lot at stake in this expensive once- or maybe twice-a-year event.

Even before the COVID-19 pandemic started wreaking havoc on so many aspects of life, including travel, whether to buy travel insurance was an important question to consider. Now, even more so.

What follows are some of the most important ins and outs of protecting your vacation investment, including evaluating your risks, whether you may be covered already, and how your destination may impact the decision of whether to buy a travel insurance policy.

What could go wrong?

As with all types of insurance, the first step in choosing whether to purchase a travel policy is weighing your risks and considering how much money may be at stake.

Typically, the biggest vacation costs are for flights, hotels, or a cruise. As you make your plans, a good first step is to understand whether your purchases are refundable. In many cases, that’s an option with an additional cost. Deciding whether to go that route is largely about:

  • What risks might put the trip in jeopardy;
  • Whether your travel supplier would offer a credit if you were to cancel;
  • How much a credit would cost;
  • Whether a credit would be acceptable to you; and
  • What protection your credit card might provide.

If you purchase a non-refundable ticket and cannot travel, some credit cards will reimburse you for the cost — it depends on the reason for cancellation. If illness prevents you from traveling, you may be covered. But if you simply change your plans, you probably won’t be covered. If you want the flexibility to change your mind for any reason, it would be wise to choose the more expensive refundable option.

Credit card protection

A family I know is planning a trip to the South Carolina coast this summer. Concerned that a hurricane could jeopardize their non-refundable rental-house prepayment, they were tempted to buy a $400 travel insurance policy. Before doing that, they checked to see what protections might be provided by their credit cards.

When they looked up the benefits available from one of their cards, an American Airlines co-branded MasterCard issued by Citibank, they were surprised to discover that it provides no travel protection whatsoever. They thought they had remembered differently. Sure enough, in September 2019, Citibank eliminated a slew of card benefits, including coverage for trip interruption, trip cancellation, rental car, travel accident, baggage delay, lost baggage, and more.

Fortunately, they also have a Chase-issued Visa card that provides extensive travel protection — including reimbursement for non-refundable expenses incurred if cancellation is due to “severe weather [that] prevents a reasonable and prudent person from beginning or continuing on a trip.” The main caveat is that the card must have been used to pay for “a portion” of expenses eligible for reimbursement.

Travel insurance

If you have travel protection through a credit card, whether to go a step further and buy a travel insurance policy comes back to what risks you’re trying to protect against. Some travel insurance policies provide more comprehensive coverage. For example, suppose someone in the traveling party is pregnant and needs medical attention related to the pregnancy while on the trip. That is more likely to be covered by a travel insurance policy than a credit card.

Many travel suppliers, such as airlines, cruises, and Vrbo offer travel insurance through a third party when you book your reservation. Check to see what such policies cover and compare their coverage with what you may have through a credit card. If you’re tempted to buy a separate travel insurance policy, you may find better coverage at a lower price by using a travel insurance broker — such as InsureMyTrip or Squaremouth — that offers policies from many providers.

The COVID caveat

Typically, trip cancellation or interruption coverage pertains to non-refundable prepaid travel expenses. However, with an international trip, as of this writing, you must test negative for COVID the day before your scheduled return to the U.S. If you test positive, you will likely incur additional (non-prepaid) expenses for extending your stay until you are cleared to travel. That’s the scenario my family experienced this year on a much-delayed, much-anticipated, long-saved-for trip to Paris, France.

We had a wonderful seven days. Unfortunately, it was an eight-day trip. On the day before our scheduled return, my wife tested positive for COVID. That led to a series of stressful decisions, the first of which was to have her remain in Paris while the rest of us flew home. With four negative tests in hand, we realized that if we all stayed there was a risk that COVID could domino through our family, and who knows how long we’d have to stay? Plus, my wife was symptom-free, so we figured it would mean a pleasant, if inconvenient, extra week in a Paris hotel.

Unfortunately, we figured wrong. She became quite ill, almost had to be hospitalized, and ended up needing to stay an additional two weeks. Thankfully, she’s home now and fully recovered, so I’ll focus on the financial aspects of that challenging experience.

This was one of the risks we considered before our trip, which is why we selected a policy that covered additional expenses we would incur if a required quarantine prevented us from returning as scheduled. We deemed the $500 price tag to be a fair trade for the added peace of mind it would provide. However, just as it’s impossible to anticipate every risk you might face, it’s also impossible to anticipate how that risk might play out.

Our scenario was protected under the policy’s “trip delay” provisions, which said it would reimburse up to $250 per person per day up to a maximum of $2,000 per person for additional hotel, food, and other “reasonable” expenses incurred by a mandatory extended stay. (Apparently, if we had all stayed, we would have been covered for up to $1,250 per day up to a maximum of $10,000.)

All told, the two extra weeks added more than $4,000 to our cost. We hope to be reimbursed $2,000 plus some medical expenses, which are under a different limit. (Medical coverage is another reason to consider a travel insurance policy for an overseas trip.) As of this writing, the claim is still in process. When I filed the paperwork, I was told that it could take 60 days just for them to review the claim. So we wait, and we hope.

Step by step

There’s a lot to consider when it comes to travel insurance. Start with assessing your risks and how much money is at stake. Check with the travel supplier (airline, hotel, cruise company) to see if your purchase is refundable or creditable. Then check with your credit card to find out what coverages you already have. Finally, consider whether the peace of mind provided by a travel insurance policy would be worth the price.