Travel Insurance Is No Longer Just for the Over-Prepared

Last year a friend slipped and broke her ankle the day she was scheduled to travel to Paris. Instead of a trip to the Louvre, she took a trip to the hospital. She had to cancel her flight on OpenSkies, owned by British Airways. OpenSkies was not very openhearted: it offered her a small credit on a future flight but made her pay the full fare for the one she missed.

This is exactly what travel insurance is designed for, not to mention a hurricane or a blizzard that shuts down the Eastern seaboard and strands tourists for days. But travelers still hesitate. “In general only 20% of the people who are eligible and should be buying travel insurance do buy it,” says Dean Sivley, president of Berkshire Hathaway Travel Protection. Why? In the past, insurance was overpriced and overcomplicated. That’s rapidly changing as insurers try to capitalize on shifts in aviation.

Berkshire is one of the newer players in the $3 billion leisure-travel-insurance market, which includes web outfits like Protect Your Bubble and traditional players such as Allianz, Nationwide and AIG’s Travel Guard. These companies are offering more à la carte options that let you protect against inconveniences such as flight delays, cancellations and broken connections. You can even buy coverage that lets you call the whole thing off if you are hauled into an unexpected business meeting, your travel partner bails or you simply change your mind.

Berkshire is trying to expand the market by automating the process with an app called AirCare. Open an account and you can buy a basic AirCare policy for domestic ($34) or foreign ($46) flights that pays out automatically if your trip is cancelled or delayed by two hours. Berkshire and others also offer concierge services: if you get stuck, they’ll rebook or find a hotel for you so you’re not left waiting on a queue.

Insurance isn’t becoming just more available and affordable–it’s also more necessary. That’s because individuals now bear more of the risks of travel. For instance, airlines have transferred capacity risk–that is, filling seats–to travelers in the form of nonrefundable tickets. Likewise, if bad weather grounds a jet in Atlanta and leaves you stranded in Charlotte, N.C., for your flight to Phoenix: tough, you’re on the hook for the hotel. If you fly out of New York City, Chicago or Dallas–Fort Worth, you can count on being late 25% of the time.

Travel insurance makes more sense the more you have at risk–say, if you are about to spend a large amount on a once-in-a-lifetime journey. (Check your medical insurance before you leave: it might not get you out of certain countries if you get sick.) Typically, protection runs 4% to 8% of the trip’s total cost, depending on the age and destination of the traveler–the older or bolder you are, the higher the price. Travel Guard’s basic plan for a $5,000 trip to Paris costs $144 for a 30-year-old; its gold plan for the same trip is $190. Protect Your Bubble’s deluxe plan, at $262.50, adds $100,000 in medical coverage and $250,000 for emergency evacuation, for instance. Make sure you understand all the coverage definitions–say, what constitutes a medical reason for canceling. They are spelled out clearly in the fine print.

As has happened in airline booking, aggregation has come to travel insurance. InsureMyTrip.com and SquareMouth.com allow you to pick and choose among already vetted carriers, including HTH, InsureandGo USA, April, RoamRight and Seven Corners. You check off the coverages you want and get a menu of competing offers. Recently, I used SquareMouth.com to insure a multicity domestic trip for two for $91.50 with CSA Travel Insurance, including coverage for trip cancelation, interruption, delay and weather. (Everything went smoothly, natch.)

Buying travel insurance is a lot like packing. Do you want to take that extra sweater or raincoat, just in case? My travel risk tolerance has been fairly high, so I’ve never bought insurance. Experience has taught me how to deal when the airline spit hits the turbofan. But there is so much spit in the air these days that I am more apt to pack that raincoat after all.