How Travel Insurance Works: A Practical Guide to Travel Insurance

Learning how travel insurance works isn't always easy. There are so many varying policies for flight insurance, cancellation insurance, medical insurance, and the list goes on. And if you're travelling for an extended period of time, there are even more things to consider.

Due to the global pandemic, flights were cancelled all over the world. As travelers quickly learned, getting a refund wasn't a guarantee, even if you had travel insurance. That said, those who did have travel insurance were left in a much better position as it gave them some rights.

What many people don't realize is that trip cancellation/interruption is just one aspect of travel insurance. There's also travel medical, lost luggage, travel accident insurance and more. Having full coverage may not be necessary, but it's important to understand how travel insurance works before your next trip.

Travel Medical Insurance

Most people associate travel insurance with travel medical insurance. As in, if you have travel medical insurance, your bills will be covered if you need to visit the doctor or hospital when you're abroad. Considering how much medical attention can cost in foreign countries, you'd be crazy to not travel with travel medical insurance.

Travel medical insurance is inexpensive and you may even already have it. Many Canadian employers offer travel medical insurance as a standard benefit.

Canadian provincial healthcare covers you if you get injured in another province or territory, but it may not provide coverage for emergency services such as a helicopter evacuation. As soon as you leave the country, your medical coverage ends which is why you want to ensure you have the right travel insurance in place.

Extended Travel Insurance

Extended travel insurance is where things get confusing as there are different terms and conditions for each individual benefit. It's a separate policy. Extended travel insurance is also not automatically included with travel medical insurance. Here are some of the most common extended travel insurance policies.

Trip Cancellation/Interruption

Having trip cancellation will allow you to cancel your trip before departure or while you're travelling. To get paid out, you need to meet certain conditions e.g. you're cancelling due to a qualifying reason.

Baggage Insurance

Baggage insurance pays you if your bags are lost or delayed. For delays, you would need to wait 4-6 hours before you can make it a claim. If your luggage is lost, there are specific conditions you need to meet before you can make a claim.

Did your bags make it to your destination and you need to store them? For instance, you might be on a layover, have time before/after a flight, or you've arrived super early before you get to check in to your accommodation. Check out this review of Bagsort, the "Airbnb of luggage storage".

Rental Car Insurance

Auto insurance is mandatory when you rent a car, but you don't necessarily have to get it from the rental agency. If you have auto insurance at home, your policy likely covers you when you're travelling. Best of all, your regular insurance plan will usually include third party liability insurance, so you don't need to worry about purchasing additional coverage.

Hotel/Motel Burglary Insurance

If someone breaks into your hotel or motel and steals your personal belongings, you'd be able to make a claim.

Accidental Death & Dismemberment

Hopefully, you never need to make a claim here, but accidental death & dismemberment gives you or your next of kin a lump sum if you lose a body part or pass away while travelling.

How Travel Insurance Works: Understanding Conditions

Since we're talking about insurance policies and how travel insurance works, you need to read the fine print. That way, you will know exactly what you're entitled to. Most people will never actually do this, so they don't know when they can make a claim. You don't need to understand everything, but at least read the basics.

For example, the American Express Platinum Canada Card gives you $5,000,000 in travel medical insurance for up to 15 days if you're under the age of 65. Then there's the Scotiabank Passport Visa Infinite Card that only gives you $1,000,000 in coverage, but it's good for 25 days if you're under 65 or 10 days if you're 65+. A senior relying on credit card insurance would obviously favour the Scotiabank card.

Interestingly enough, how you purchase your travel also plays a factor in how you're insured. With Canadian credit cards that include travel insurance, you're automatically covered for travel medical. However, with extended travel insurance, it's not that simple as every policy is different.

Always Read the Fine Print

Let's say you want to make sure you have trip cancellation insurance. If you read the fine print of the policy, it'll likely say you need to charge 75%-100% of your flights to your credit card with travel insurance for the policy to be valid. The same thing would likely apply to hotel/motel burglary and rental car insurance. It's annoying, but that's how insurance works.

On a positive note, the BMO World Elite Mastercard has very loose conditions to be insured. The insurance policy clearly states the following: "Coverage applies only when You charge the full or partial cost of Your Trip to the Primary or Family Cardholder's Mastercard prior to departure."

Partial is the keyword in that statement. Since there's no defined percentage, partial means you could charge just $1 of your travel expenses to your credit card and you would be insured. This is especially handy if you're booking your trip on points and only have a small outstanding balance to pay.

How Does Travel Insurance Work: Making a Claim

Okay, so you've met all the conditions and you need to make a claim, things should be easy right? Yes and no. Let's say your flight has been delayed for 6+ hours and you're now entitled to compensation; you need to make sure you follow the right steps, so you get paid.

The first thing you'll want to do is obtain proof of the delay. If you're at the airport, taking a picture of the display showing the delay will do. Alternatively, you can also take a screenshot of the delay in your app or save the email confirming the delay.

With that proof, you'll want to call your travel insurance provider to open a case. They'll also be able to tell you exactly what you're entitled to. Most policies would allow you to claim meals, accommodations, and entertainment. You might even be entitled to claim clothes and personal items you had to purchase due to the delay.

Make sure you hang onto all your receipts as you'll likely need them when you make your formal claim. As soon as you get a chance, send in all your documents so your insurance claim can be processed. Many providers have a set time limit, if you miss it, you're out of luck.

Final Thoughts About Trip Insurance

Travel insurance is something that you should never leave home without. Learning how travel insurance works is key. It's important to understand your insurance policy so you know what you're entitled to and when you can make a claim. With that information in hand, you can travel knowing that you're protected.

Do you want to know more tips about staying safe while you travel? Check out these top 10 safety tips that are great to reference no matter where you're traveling in the world.

Do you travel south for the winter, whether you're a senior traveler or a digital nomad? Definitely look into obtaining travel insurance for snowbirds, a special travel insurance package for your specific needs and travel style.