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

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.