What Determines the Cost of a Travel Insurance Policy?

tripcostBuying travel insurance can be confusing because no two policies are the same. Unlike car or homeowners insurance, there is no standard form policy for travel insurance. Not only do these plans differ from one insurance company to another, but they also may differ from state to state. Maybe you talked to someone who claims to have bought the same type of policy, but paid less than what you’ve been quoted. The devil is in the details. Unless you know the coverage provisions, and exclusions, it is really difficult to compare on price alone. There are many components that go into the cost of a policy, so here is how the travel insurance companies determine the price. By knowing these factors, it may be easier for you to evaluate and compare plans.

Your age is one determining factor in the cost of the policy. Generally speaking, the older you are, the higher cost for your insurance because of the increased risk of medical treatment or trip cancellation due to medical problems. Insurance underwriters group ages into brackets. If you are only one year older than one of your traveling companions, you may fall into another bracket and be paying a higher premium. One advantage of travel insurance purchased in the USA is that your current health is not considered in pricing the plan. A pre-existing condition waiver however does generally increase the cost of the plan but is always worth the extra cost. This feature is available in some plans if you purchase the insurance within 14 days of your initial trip deposit. The pre-existing condition exclusion is waived if you purchase the plan just after you book the trip. Without this waiver, the insurance company can refuse a claim for cancellation, medical treatment, or medical evacuation for any illness that you sought treatment from your doctor within 60-120 days before you purchased the plan.

Your total trip cost makes a difference. The less expensive your trip is, the lower the cost for your insurance. A tip to save money when purchasing the plan – you only need to insure the portion of your trip that is subject to cancelation penalties. If you can get a refund on a deposit, you don’t have to insure that expenditure. Plans that include cancel for any reason coverage (the Best Plans on TripInsurance.com) require that you insure the full amount of any trip cost that could be subject to cancellation penalties, so make sure you use the correct value for your trip cost when buying one of these plans.

The Length of your trip will affect the cost of your insurance. Don’t try to save money by only insuring part of your trip. If you’re traveling to get the starting point of your vacation, include that time as well. You are only covered for the dates you used to purchase the policy. For example, if you include your travel dates and travel costs to get to your cruise, then travel insurance will cover you for travel delays that may make you miss the cruise.   If you only insure the dates of the cruise and the cruise itself, then the travel insurance coverage doesn’t start until you make it to the cruise and embark.

Coverage isn’t the same from plan to plan. For example, it’s easy to compare the dollar amounts of coverage for medical, evacuation and baggage. But what is the coverage for trip interruption? Some policies provide 100% coverage, but better plans provide 125% or even 150%. This extra coverage is important if you have to interrupt your trip just a few days after you start. The trip interruption coverage refunds the cancellation penalties for you unused vacation and covers the cost of returning home up to the coverage limits. This extra 25-50% of the trip cost makes sure all your expenses will be covered.

Covered reasons for cancellation vary widely from policy to policy. All plans include coverage for sickness, injury or death. Some policies cover cancellation for work reasons, terrorist activities, hurricane warnings at your destination, and more. As I mentioned above, some policies include a waiver for pre-existing medical conditions. The most comprehensive policies include cancel for any reason – you can cancel your trip within a specific amount of time without having to cancel for a “covered reason.” Generally speaking, the better the coverage you are purchasing, the higher the cost. This is where you really have to trade off the value you are getting from the policy. It may be worth paying $10-$20 more to get better coverage provisions. If you don’t need the total freedom of a cancel for any reason policy, you can save money. If you’re not traveling abroad, you probably don’t need $250,000 in medical evacuation coverage.

Insurance agent commission isn’t negotiable, but different agencies take different commission percentages than others. This directly affects what you pay for the insurance. By purchasing your policy direct from the underwriter on TripInsurance.com, we eliminate two levels of middlemen and can save you 40% or more on competitive coverage. By taking out the middleman, you’re paying less money for your insurance so you’ll have more money for your vacation.

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