5 Things You Didn’t Know About Travel Insurance

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Hundreds of thousands of fans from around the world are expected to visit London for the Olympic Games this summer, and it’s a guarantee that some of them will get sick right before their trip, have their luggage lost or have a medical emergency away from home. So it’s not surprising that more people are thinking ahead and purchasing travel insurance in case something goes wrong. A recent survey conducted by Allianz Global Assistance USA found that sales of travel insurance to people going to London this summer have climbed 36% over last year.

But all travel insurance is not created equal, and it’s important for travelers to understand when, where and exactly how they’re covered — or they could find that they’ve shelled out for a policy that doesn’t protect them.

“People assume that all polices work the same and that all terms are defined the same way,” says Steve Dasseos, founder of TripInsuranceStore.com, a travel insurance sales and education site. That’s not true.

Cancellation policies reimburse you if you have to cancel your trip before you leave, while trip interruption policies apply if circumstances dictate that you cut your vacation short. For both types, issues often arise in the details of what the policies exclude and limit. Here are five categories of fine print that experts say many people don’t notice until they need to use their policy.

Preexisting Conditions

Travel attorney Al Anolik says the clause that excludes preexisting conditions trips up many travelers. If you have a history of high blood pressure, diabetes or other fairly common conditions and you have to cancel or cut your trip short as a result of an issue related to that condition, you’ll be denied.

Even something as simple as switching a medicine or dosage within the past six months can count, cautions Dassoes.

Anolik says, “I’ve seen policies that say if you’ve ever taken medication for an ailment it’s excluded.” This is a worst-case scenario; a better alternative is a policy that has a lookback period, even though some of these can be as long as six months or a year. Anolik warns that seniors should be especially careful when it comes to these clauses, since they’re more likely to have chronic conditions or take daily medication.

The preexisting conditions clause doesn’t just apply to you: If you have to cancel a trip because a family member falls ill or has a medical emergency, most policies won’t pay if it was due to a preexisting condition.

(MORE: Hey Airlines, Do You Really Want to Split Families Up on Planes?)

Evacuation

Anolik says there are some policies that promise evacuation, but the big asterisk is that they exclude medical evacuation, which is probably what most people assume the coverage is for when they think of emergency evacuation.

Even medical evacuation policies often don’t always play out the way people expect, Dasseos says. First of all, you’re probably not going to be whisked away on a private plane; instead, you’ll probably be on a commercial airliner — although some policies will make special accommodations  like letting you sit in business or first-class if your emergency makes sitting in coach difficult.

There are some specialized medical evacuation policies; Dasseos says the trick with these is that they’ll transfer you from a hospital in the country where you’re located to one in the U.S. Of course, this means you have to be in a foreign hospital, which can result in steep medical bills when you get home, since many health insurance plans, as well as Medicare, don’t cover policyholders overseas.

Terrorism

Policies that include terrorism as a reason for trip cancellation or interruption are becoming more common, Anolik says, because more travelers post-9/11 are demanding that kind of coverage. But read the policy carefully: Some will pay out only if a terrorist incident happens in the same city where the attack occurred.

Anolik says he handled a case for a tour group that went to Turkey and had the misfortune to be there when an attack occurred on the outskirts of Ankara. Because it technically took place in a separate municipality, the policies they thought would protect them didn’t pay out.

(MORE: 10 Ways to Improve Your Financial Health)

Rebooking

As strange as it sounds, Dasseos says “cancel” might not be defined by your carrier the way you would define it, particularly when it comes to airfare. In the insurance company’s eyes, if you cancel a flight, then pay the change fee and rebook it so you can go another time, that’s not really canceled. “The airline will try to get you to agree to pay the change fee,” Dasseos warns. But if you do, you’ve forfeited your chance to a claim for reimbursement.

Reimbursement

“Cancellation only covers prepaid nonrefundable trip costs,” Dasseos says. This has implications for you when you choose what dollar value to insure — if you put a $500 deposit down on a $5,000 trip and have to cancel, you’ll only get reimbursed for the $500 you’ve already paid out. Dasseos says many people don’t understand this and wind up overpaying for coverage.

One final bummer: Trip interruption insurance will generally pay you for the unused portion of your trip or an early flight back home — but not both.

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