Summer will be over in just a few months. If you're planning a vacation this year, you don't want something unexpected to happen that derails your plans (and costs you hundreds).
Flights are frequently delayed or canceled. The luggage disappears into thin air. Medical emergencies occur in remote areas. But instead of preparing for the worst, many jet-setters just hold their fingers in their mouths and hope for the best.
That's why, as financial planners, we think it's important to consider protecting your trip with the right insurance. One option that is often overlooked, especially by frequent travelers, is annual travel insurance.
Annual travel insurance covers all trips within 365 days. Unlike standalone travel insurance, which only covers specific trips, annual insurance covers all the trips you take during the year.
That's why I tell my clients who travel frequently that annual insurance is a good choice for their needs. Choosing an annual plan eliminates the hassle of booking multiple policies and can potentially save you money compared to purchasing individual travel insurance. Here's how it works:
What to look for in a policy
Although details may vary by insurance company and plan tier, most policies include the following key benefits:
- Trip cancellation or interruption: You may be able to receive a refund for expenses (some of which are non-refundable!) that require you to cancel or shorten your trip due to illness, injury, or natural disaster.
- Emergency medical and dental care: If you get sick or injured while traveling, your insurance will cover your medical expenses.
- Emergency evacuation: In the event of a serious medical emergency or security situation, your insurance will arrange and pay for your transportation to the hospital or back to your home country.
- Lost, delayed, or damaged baggage: If your luggage is lost, delayed, or damaged during your trip, you can receive financial compensation for essential items while you wait for your luggage to be recovered or replaced.
- Travel delays and missed connections: If your travel plans are interrupted due to issues such as mechanical issues or bad weather, you may be eligible for reimbursement for additional costs such as meals, accommodation, and transportation.
It is important to note that annual travel insurance plans have limitations. Certain high-risk activities, pre-existing conditions, and travel to certain areas may be restricted or require additional coverage.
Some travelers may think that the travel protection built into their credit card is enough. Many travel rewards credit cards come with benefits like rental car insurance, trip cancellation, and baggage refunds, but coverage limits are often much lower than dedicated annual travel insurance plans.
Credit card coverage for medical emergencies is also particularly limited, capped at a few thousand dollars, which may not be enough if you're faced with a major international medical emergency.
How much travel do I need to plan for a year?
If you only travel once or twice a year, a one-time travel policy is probably right for you. However, you may want to consider an annual policy if any of the following apply to you:
- Regular overseas travelers (overseas trips 3 or more times a year)
- Business travelers who travel frequently for work
- Adventurers who engage in high-risk activities such as heli-skiing, scuba diving, and mountain climbing
- Cruisers and tour group travelers
- Students and retirees who travel long distances throughout the year
- Those visiting developing countries where medical care is limited
Annual plans cover all travel within 365 days of purchase. These are basically multiple insurance policies rolled into his one package deal. This means you only need to buy one policy to manage, and your coverage is locked in for the year.
How to decide if annual insurance makes sense for you
Start by reviewing your travel plans and risk tolerance for this year. Calculate how much individual travel insurance will cost you over the next year and compare it to the price of an annual plan.
Don't just focus on premiums; carefully evaluate coverage limits, exclusions, and deductibles to ensure you have enough coverage for your needs.
Annual insurance gives you the flexibility to travel without the hassle of purchasing last-minute insurance. More importantly, you'll have peace of mind knowing you're covered for a variety of travel disruptions and emergencies.
With the busy summer travel season in full swing, you should definitely consider protecting your trip with insurance, especially if you're heading overseas. Spending hours on the phone trying to rebook a canceled flight or worrying about paying for a medical emergency overseas is no way to vacation.
