Your airline wants to sell you insurance -- but what's it worth?

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The Airfarewatchdog Blog

Your airline wants to sell you insurance -- but what's it worth?

Posted by George on Tuesday, July 15, 2008

by DAVID LANDSEL

    People who never before considered travel insurance might look back on this turbulent summer as the one that pushed them over the edge. And if you’ve shopped around for an airline ticket lately, you can’t help but have noticed that somewhere in the process your airline has offered to sell you what looks to be a fairly cheap insurance policy, usually for $9, $12, $15 or a similarly affordable amount, per trip.

Should you bite? Not until you read the policy carefully, and getting a copy before you buy requires quite a bit of mouse clicking.

All airline-sold policies, such as this one sold by Northwest, have one serious flaw: they don’t cover the airline’s default. And most don’t cover pre-existing medical conditions under any circumstances.

Some may not even cover airline-caused delays in their trip interruption clauses.

And in any case, travel insurance, whether bought from an airline or online travel agency, or the insurer directly, often is less protective than it sounds.

Trip interruption, for example, is very narrowly defined. Usually, it covers only an interruption after your trip has begun, so if you’ve put down a $1000 deposit for a trip and a month before departure the airline “interrupts” your plans by announcing that it no longer serves your origin or destination cities, then you’re on your own. Same thing for trip cancellation: you can cancel your trip for a limited number of covered reasons, but if the airline cancels your route, that's not covered. Interesting loophole in one policy we saw: if a family member (say, your son) gets injured in an amateur sporting event (say, a football game) you won't be covered if you decide to cancel your trip.

    Spirit Airlines, for example, sells insurance for $12 per domestic flight, which seems very reasonable. There’s one major problem however: you’re not covered if Spirit should go belly up.

Compare that with a policy bought directly from a major travel insurance company.

AIG Travel Guard's “Essential” plan costs about $24, depending on various factors, for a typical domestic trip by air, but as with Spirit’s insurance, there’s no coverage for default. For that, you’d need to upgrade to an Essential Expanded policy, and then to abide by a "14 Day Wait" clause, which means that the airline would have to default more than 14 days after the date coverage went into effect.

For full default coverage with fewer (but by no means no) loopholes, you need to buy AIG Travel Guard's more expensive standard and then add an upgrade that includes coverage not only for situations in which the airline might suddenly disappear, but also acts of terrorism and pre-existing medical conditions.

    Bottom line? To be really protected, a better insurance policy covering a typical trip by air (and just the air travel portion, not hotels or a cruise) might cost more than $40. A far cry from Spirit’s $12, but look at the differences in the two policies.

     Spirit's can be called, politely, minimal. There's a flat $300 for cancellation or interruption -- read on, you'll see this is absurdly low -- $500 for travel delays (doled out at amounts of up to $100 per day), a $500 reimbursement for loss of baggage or travel documents, and a $100 pay-out for baggage delay.

     AIG's "My Travel Guard" policy, on the other hand, covers the entire quoted trip cost in case of cancellation or interruption, $1,000 in case of stranding for return air, $500 for unreasonable delays (maximum of $100 per day), $10,000 for medical expenses in the case of accident or sickness, $100,000 for emergency evacuation and -- how grim! -- the repatriation of remains, $500 compensation for loss of baggage, $100 for baggage delay, plus, the option to purchase a plethora of upgrades.

    WHY DO I EVEN NEED ADDITIONAL INSURANCE?

    Many people believe that additional coverage isn't necessary, that they already have plenty.

    While Travelocity's plan is flimsy like Spirit's, you've got to give them credit for at least one thing -- addressing the matter of whether or not purchasing the coverage they sell is even necessary. Points to remember: People tend to think their credit cards include ample coverage. You may be right, but you may be wrong. Additionally, does your health insurance cover you outside of the United States? Does it include an emergency evacuation plan?

    One notable point at which Travelocity stumbles, though, is with its trip cancellation policy (that is, if you have to cancel for some reason.)

    Travelocity will refund the full cost of the trip, sure -- up to $2,000, as it points out incessantly throughout one policy document (note that it says "total trip cost" in one place and "total trip cost up to $2,000" in others. Other policies only cover up to $500 per flight domestically or $800 for international travel.

      AIG's policy, detailed above, covers the entire quoted trip cost at the time of purchase. Even AirTran's otherwise fairly flimsy policy, sold via a company called Stonebridge, does not state a limit.

    There are other important differences between Travelocity's policy and a typical travel insurance policy directly from the source. However, essentially you're seeing a pattern here. Like elsewhere, say, at Orbitz, insurance purchased from a third party is always going to be cheaper than if you bought directly, but the policy will always be relatively weak -- no matter which agency's name is attached to the plan that the third-party is selling. (In Travelocity's case, it's selling through BerkleyCare, a division of AON).

    MEET THE RENT-A-PLAN

    It's easy to find the holes in third-party coverage -- sometimes you don't even have to look through the policy document, which is nearly always readily available for your reading pleasure.

     Things get a little more blurry when you're looking at the policies sold by the major carriers. These policies are typically a little more meaty than those sold by lowfare airlines and online travel agencies.

     American, Continental, US Airways and United all partner with AccessAmerica, and in American's case, not only do the plans seem like they're for real, better still, they sell for as little as $16-17 per trip for an average domestic trip. American’s “Comprehensive Trip Protector” sells for 6.25% of your total ticket cost. And while it includes things like $500 for baggage delay coverage, which is along the lines of what you'd get directly from a major travel insurance company, the maximum trip cancellation/interruption protection is $3,000 per trip, and emergency medical transport to $50,000. Plus, there’s no protection from default (not that we expect American to cease flying anytime soon, so maybe it’s an irrelevant point.)

As the old saying goes: you get what you pay for.

Discussion: 18 Comments

Categories: Airfare Tips

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Reader Comments

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The best way to buy travel insurance is through an insurance provider or their appointed agent, for three reasons: 1) Travel suppliers are in the travel business, not the insurance business; they're not trained to answer the complex pre-sale questions that clients often ask. 2) If a travel supplier files for Chapter 11 default protection, your insurance premium as well as your trip investment may be lost. 3) One size does not fit all. A good travel insurance agent gets to know you and suggests the plans that fit your needs.

by Terry on Wednesday, July 16, 2008

July 16, 2008

We had to cancell our trip this past Dec (2007) just 20 days before we were to leave. We had purchased PC Financial Travel Insurance (AIG) back in April and called them and explained the situation. We had to wait until all the refunds we were entitled to came through then we filed all the receipts, etc, and we received a FULL, painless, refund. We had insured for the full amount of our trip, purchasing the full comprehensive coverage. Total cost of insuring a $3500 per person trip (2 people) - $300. Worth every cent!!! We have reinsured with them for the trip we are to take this January.

by Anne Harmston on Wednesday, July 16, 2008

Note--AccessAmerica--pre-existing conditions: Our son, 17, was just diagnosed with type 1 diabetes, was in the hospital and now is doing well--working and doing his regular activities with an insulin pump. AccessAmerica excuded him from insurance on an upcoming domestic trip d/t pre-existing condition! So much for insurance!

by Sylvia on Wednesday, July 16, 2008

I'm self-employed. I'm planning a cruise for early 2009 and I've seen some "Cancel for Any Reason" insurance. Does anyone know anything about this type of insurance?

by Theresa on Wednesday, July 16, 2008

A company called TravelSafe http://www.travelsafe.com/ sells cancel for any reason insurance, but it's considerably more expensive and you will not be covered if you cancel 48 hours or fewer before the start of your trip.

by George Hobica on Thursday, July 17, 2008

This article really glosses over the value of your credit card's trip interruption coverage. I called mine and they cover lost or delayed luggage up to $500, trip interruption, and said the canceled flight (hotel, cruise, etc.) would be covered under their normal vendor relations contracts. In other words, if the goods aren't delivered, then you have a claim.

Also, we have HMO coverage, and it does cover evacuation and emergencies outside of the U.S.

Also, check your homeowners or renters coverage for stolen property, etc.
Check your existing options carefully, because you may not need the travel insurance at all unless you are paying for more than the limits provided by your normal coverage.

by Peggy on Thursday, July 17, 2008

Everyone who is considering buying trip insurance, and that should be pretty much everyone traveling outside the U.S. these days, should start with the website Insuremytrip.com. It allows you to compare various insurance options and prices. For most, but not all, policies you have to purchase the insurance within 14 days of your first deposit on the trip in order to cover travelers' preexisting conditions. By looking at the details of the coverage, you can tell what is considered a preexisting condition. Since the health insurance my husband and I have does not cover us outside the U.S., travel insurance is a must. Because we travel to many remote places we also have SOS insurance which will help get us back to the U.S. if we are ever caught in a real jam! SOS has its own website. We buy that insurance a year at a time.

by Marti on Thursday, July 17, 2008

As a longtime travel consultant who has helped a number of clients file travel insurance claims, I enthusiastically second Jason's endorsement of Travelex. The company, IMHO, is simply the best, and has never denied any of our clients' claims. A travel agent can help travelers understand coverage and exclusions before you shell out hard-earned money.

by Ann--The Trip Chicks on Thursday, July 17, 2008

I bought Travelex travel insurance for a trekking trip to Nepal through Insuremytrip.com. I had to make a claim due to an injury I sustained prior to leaving the US. With proper documentation from my doctor they processed the claim quickly and without resistance. I was very satisfied with my policy.

by Kathleen on Thursday, July 17, 2008

"Cancel for Any Reason" is a fairly new benefit designed to provide a safety net if you must cancel a trip for a non-covered reason. It usually adds 40-50% to your premium, and will reimburse you for 50-100% of your trip cost, depending upon the policy. You might also look at "Cancel for Work Reasons", which adds only about 15% to your premium, but reimburses up to 100% of trip cost. There are lots of ramifications, so be sure to speak with a licensed travel insurance agent before buying, and be sure to read the fine print!

by Terry Seligman on Friday, July 18, 2008

What's imho insurance

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Your airline wants to sell you insurance -- but what's it worth?

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