What type of travel insurance do you need?

By Sarah Schlichter

updated 11:32 a.m. ET June 23, 2008

With the combination of political unrest, financial troubles of major tour operators and airlines, and the prevalence of nonrefundable airline tickets, more travelers have purchased travel insurance to protect themselves against unforeseen events that may impact their plans.

There are several different types of travel insurance policies available, ranging from trip cancellation insurance to emergency medical evacuation, all of which vary widely by company in what their coverage includes and how much it costs.

Make sure you know exactly what your policy will and will not cover before you purchase anything. See Traveler's Ed for help decoding your insurance policy in Travel Insurance: The Fine Print. Do You Need Insurance?

If you're asking yourself whether you need to buy travel insurance for an upcoming trip, first look at the insurance policies you already have to see what they will cover. Some medical insurance policies will cover medical emergencies overseas while others will not. Many homeowner's policies cover baggage loss. Also, many credit card companies (particularly gold cards) offer their members baggage loss, international medical assistance, and accidental death and dismemberment insurance if they simply charge their airline tickets on their credit card or for a small additional fee.

Since September 11, 2001, many are looking to travel insurance to safeguard their trip against any unforeseen terrorist attacks at their destination. Many policies now have an "Acts of Terrorism" clause that will reimburse you if you miss or are delayed in getting to your origination or ending destination because of acts of terrorism.

When considering trip cancellation insurance, take time to think about how much money you'll be putting down before your trip. Are you purchasing expensive airline tickets that can't be refunded? Are you putting down a large nonrefundable deposit on a cruise or tour? If the answer is yes, or if you might cancel for any reason, then buying trip cancellation insurance might be a prudent idea.

If you're an adventure traveler who has paid $3,000 up front for a white water rapids package deal in a remote area of South America and you won't receive any refund if you cancel, then you might want to consider both trip cancellation and emergency medical evacuation insurance.

If you are a student, a teacher or a young person aged 12 - 25, one of the best deals around is STA Travel's international travel insurance. Premiums start at $48, and cover items such as hospital stays, accident medical expense, emergency evacuation, accidental death and dismemberment, repatriation of remains, passport protection and baggage delay insurance. The company also offers inexpensive coverage for domestic trips.

Types of insurance
Following is a brief description of the different types of travel insurance options available. Note that every policy is a little bit different, so be sure to read the fine print carefully before purchasing any travel insurance.

Trip cancellation/interruption insurance covers you if unforeseen events cause you to cancel or interrupt your trip. In general, this coverage is meant for illness, injury or death suffered by the insured or a member of the insured's immediate family. Some policies also cover cancellation in the event of illness, injury or death to the insured's travel companion. Most policies exclude trip cancellation in the event of war, civil disturbance or a change in your own financial circumstances. (Lose your job before your trip? You're probably out of luck.) Some policies also exclude travel to specific destinations which are prone to political unrest.

Many comprehensive travel insurance policies now include coverage if your tour operator defaults; however, it is important to understand exactly what is covered by your policy. If you buy a policy directly from a tour provider, usually it does not cover the default of that provider — so it's usually a good idea to purchase your policy from an independent company. Some policies only cover tour operator default if the operator ceases operations entirely, which they may not do even if they file for bankruptcy.

Some travel insurers are now offering comprehensive "cancel for any reason" policies. You can find more information on several such policies at TripInsuranceStore.com.

Medical insurance encompasses several types of coverage. Emergency medical evacuation insurance covers the cost of transportation if a qualified physician determines that you must be evacuated for medical treatment to the nearest medical facility or to the United States (if it's warranted), due to a physical injury or sickness. This insurance is highly recommended for cruise passengers and adventure travelers visiting remote areas.

For example, if you fall and are injured while trekking in the Himalayas, you might need to be evacuated by private helicopter, then airplane — which can get quite expensive. Emergency medical evacuation back to the United States without insurance can easily cost $35,000 or beyond.

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