Should you get travel insurance? Why it might be a smart buy after Hurricane Beryl - with one caveat

Andrew Keshner

'Look for exclusions. Get multiple quotes. Don't just go with prices.'

As Hurricane Beryl churns toward Mexico, its strength so early in the hurricane season - and the summer travel season - is a reminder of the value of travel insurance, experts say.

When, that is, these policies are purchased wisely, and when they're bought long before Mother Nature can upend travel plans.

On Wednesday, Beryl headed toward Jamaica, with the Cayman Islands also in its potential path. Beryl was downgraded to a Category 2 storm, but it broke records as the earliest Category 5 hurricane to emerge in an Atlantic hurricane season, which runs from June 1 to Nov. 30.

Michael DeLong, a research and advocacy associate at the Consumer Federation of America, said he was inclined to recommend that people traveling to the Caribbean region anytime soon should pick up coverage.

DeLong said he might extend that recommendation to other travelers in general. Of course, it depends on variables like the vacation's length and its cost, he said.

"We would recommend you at least do careful and thorough research on purchasing travel insurance," he said. "Look for exclusions. Get multiple quotes. Don't just go with prices."

"This is going to be an active [hurricane] season," said Meghan Walch, director of product at InsureMyTrip, a quote-comparison site. "You don't know what's going to happen. It's always best to purchase early."

Hurricane Beryl gained its top force 15 days earlier than the previous record holder, Hurricane Emily in 2005, according to Brian McNoldy, a senior research associate at the University of Miami's Rosenstiel School of Marine, Atmospheric, and Earth Science.

Not everyone is traveling to destinations with the potential for hurricanes this summer. But travel insurance is meant to reimburse people for trip costs after a range of unforeseen events, including certain illnesses and medical conditions that materialize before a trip.

Americans spent almost $4.3 billion on travel-insurance protections in 2022, according to the U.S. Travel Insurance Association, a trade group.

These plans covered around 77 million people, according to estimates.

This summer, many people are thinking extra hard about the best ways to spend their money and their time. They may also have to contend with more extreme weather due to the effects of climate change. With all that hanging over vacationers, here's what they should think about when considering travel insurance.

What is travel insurance?

Think of travel insurance as an umbrella term to cover a range of things that can go wrong. There's coverage for trip cancellation and interruption, along with coverage for damaged, lost and stolen baggage and belongings. There's also coverage for emergency medical assistance and accidental death.

Generally, the covered reasons for trip cancellation include diagnosed injuries and medical conditions that prevent travel, the death of a travel companion or a close family member, or legal matters like jury duty or a witness appearance under subpoena. Anyone purchasing insurance should read the policy carefully to learn about any potential exclusions.

And, yes, these policies can apply to natural disasters, including hurricanes.

Trip-cancellation coverage can apply when airlines stop flying because of weather conditions or when the destination comes under a hurricane warning, Walch said.

It may also apply when a hotel or resort is not habitable because of the weather. If someone is about to travel and their own home is damaged in a storm, that may also count as a covered reason. Again, it's important to read a plan's specifics closely.

One important thing to keep in mind

Timing counts for travelers worried about weather. Once a storm has been named, insurers no longer view it as an unforeseen event, Walch said.

Generally, if a traveler buys coverage after the storm is named, they would not be covered for storm-related losses, according to insurer Allianz (XE:ALV). But the policy could still apply to other scenarios, like cutting a trip short because of a covered illness.

The National Hurricane Center names storms once they have sustained winds of 39 miles per hour. The upgrade to a hurricane occurs when winds reach at least 74 miles per hour.

It's possible to find travel-insurance policies tailored to a specific type of coverage, like medical care abroad, Walch said. Medicare and Medicaid do not pay for medical costs incurred overseas, and health-insurance companies may not cover any or all of those bills, according to the U.S. Department of State.

A policy that offers "comprehensive coverage," bringing together the various types of coverage, is the most popular version sold through InsureMyTrip, said Walch.

Can credit cards replace travel insurance?

Credit cards may also offer cancellation and interruption reimbursements for eligible travel purchases, said Ted Rossman, a senior industry analyst at Bankrate. That could negate the need for travel insurance, he said, adding: "More cards than people realize have these perks."

The terms and amounts of travel coverage can vary from card to card, with the wording tucked into the fine print. Card users can call customer service to learn more, he said.

Consumers often think of credit cards in terms of their banking capabilities, but this is a low-key benefit that could be very helpful. "There's no special opt-in. If you use a card and it's an eligible expense, then you are covered," he said.

Before turning to a credit card's services, Rossman recommends dealing directly with the hotels, airlines and other companies that are still charging the card when travel plans go south.

How much does travel insurance cost?

A policy typically runs between 4% and 10% of the nonrefundable cost of a trip, Walch said. Expect price tiers where travelers pay more for richer amounts of coverage and reimbursement, especially when it comes to medical costs incurred abroad, she said.

The policy is covering the prepaid, nonrefundable costs of the trip, Walch said. Travelers should count up all the money they would not get back if they pulled the plug up to the day before departure. "That is the amount you want to insure," she said.

There are policies that will pay for covered reasons, and there's also coverage that enables someone to cancel for any reason, Walch said. That could let someone say, "the weather is a little bit iffy, I'm not feeling comfortable, I'm deciding to cancel my trip," she said.

These policies typically pay back 50% or 75% of the nonrefundable costs and usually allow cancellation up to two days before departure, she said. But such flexibility is expensive, typically adding an extra 50% on top of the insurance plan's base cost, she said.

The provision also doesn't stay in force for long. "This is a time-sensitive benefit. It usually has to be purchased in your coverage within 10 to 21 days after initial trip payment," Walch said.

How long does reimbursement take?

It usually takes insurers somewhere between a few weeks and a month to process a claim, said Walch. The more receipts and documents the thwarted traveler can supply up front, the quicker things will proceed, she said.

Insurers can't unfairly deny a claim or make a policy holder "jump through hoops" for their money, DeLong said.

If that happens, people should file a complaint with their state's insurance-oversight authorities. "Hopefully, that should get the company to do right by you," DeLong said.

See also: Airline passengers are now entitled to automatic cash refunds for canceled flights. Here's how to get yours.

-Andrew Keshner

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07-05-24 1005ET

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