Home / Business Courses / Travel Insurance

Travel Insurance

Definition of Travel Insurance

According to Investopedia, an Insurance is "a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured".

Investopedia defines Travel Insurance as "a type of insurance that covers the costs and losses associated with traveling. It is useful protection for those traveling domestically or abroad".

Travel Insurance is generally sold as a part of a travel package. However, in some cases, travelers can buy one separately as well.

A travel insurance can help in medical emergencies, lost/delayed baggage, missed/delayed flights, replacing lost passports, and more. We shall read about these in the following slides.

Why do you need a Travel Insurance?

Travel insurance safeguards a one from unforeseen circumstances while traveling. A dream vacation might turn into a nightmare if your clients are not prepared to

DOMESTIC –

Travel Insurance is not very popular while traveling within one’s home country, as the traveler’s life insurance or Mediclaim covers a significant part of the unforeseen circumstances. Most airlines now also offer zero-cancellation benefits and baggage insurance at an additional cost.

In case a person does not hold any other Life Insurance or their existing policies do not cover medical emergencies while traveling, a Travel Insurance will prove to be a good investment.

INTERNATIONAL –

Many countries like the USA, South Africa, Australia, Schengen region, etc. require overseas travel Insurance as a mandate to apply for a Visa.

Even when it is not a mandate, it is good to have travel insurance as medical costs in many countries can be exuberantly high, in the absence of insurance. Additionally, after the current crisis, it is highly likely that visitors may want to seek Travel Insurance to visit the rest of the world as well.

Basically, if the trip costs more than what your client is willing to lose in case of any emergency/ cancellation, it is better to get insurance. This is especially true for expensive trips.

Trip Cancellation

This is the most common factor which people generally avoid. Clients think that our travel plans are final, and there is nothing that can change their plans. Especially plans like a Honeymoon Trip.

However, a lot of unforeseen circumstances are ignored, such as death, sickness, natural calamity at the destination, etc. These are also acceptable reasons for claiming insurance for cancellation.

With the right travel insurance, one can safeguard all the out of the pocket expenses for the reasons covered in the insurance. It is important to note that the travel insurance covers only the non-refundable components that have been prepaid for.

Medical emergency during the travel

This is perhaps the most common reason why travel insurance comes handy.

Sometimes the weather or food or water of the destination does not suit the travelers, and it can make them fall sick. The travel adventures can also sometimes lead to minor or major accidents, requiring hospitalization. In most developed countries, a valid insurance is mandatory for the doctors to consult, or the medical fee may be so high as to equate the cost of the whole trip.

The right travel insurance takes care of finding medical facilities, assist in obtaining foreign language services, and take care of or reimburse medical expenses to a certain amount. Some Insurance plans also cover emergency medical evacuation, airlift, etc.

It is important to note that –

The services included in the plans may vary as per the package plan/ premium paid.
Most plans do not cover any pre-existing conditions/ ailments.
Check with your existing medical insurance provider, if the coverage extends abroad as well.

Baggage delayed/ lost

Airlines manage at a massive scale, and their procedures are generally spot-on. However, there have yet been many events where the Airlines have made mistakes, and the passengers have had to suffer. Sometimes the baggage is misplaced and does not reach the aircraft where the passenger is, or it is missing altogether. Baggage issues can also occur outside the airport, in case of lost or stolen belongings during travel.

The possibility of belongings being lost or stolen during travel is a frequent problem faced by travelers. Hence, this is another one of the common reasons for travel Insurance to get an additional layer of protection.

In any such event, the passenger can claim her/his travel insurance up to a certain amount, pre-decided in the coverage, and get some compensation for their lost/ delayed luggage. The service can help the passengers to reclaim their baggage or be compensated for the essentials in the meantime.

The baggage responsibility is generally with the Accommodation owners, and some credit cards provide additional protection. It is important to note that the baggage loss claim is made after all other available claims are exhausted.

Lost Passport

Losing a passport is not an uncommon scenario during travel. Many of us have faced such situations, either due to our negligence or theft.

The right Travel insurance can help you expedite the process of replacing it and paying for a new passport.

Missed flights/ connections

I once had a client who was to board a cruise with family, the same day his flight arrived in Singapore. Due to weather conditions, the flight was delayed for long. All the buffer kept for the commute from Changi to the cruise port was lost. My client and his family missed their cruise.

Luckily his travel insurance came handy, and he managed to save a massive amount.

The same also stands true for missed connecting flights. The right travel insurance will allow the guest to board the next connecting flight, or get a comfortable hotel for the night if needed.

Natural Calamities/ Terrorism

Before starting your trip, if the destination airport closes due to any natural calamity like - volcano eruption, floods, hurricane, etc. or a terrorist attack - relevant Travel insurance will help you cancel your trip without losing money. Such situations can also be considered in the case when the lockdown is declared due to a COVID-19 like situation

Most trip cancellation insurance packages do no cover these aspects by default. The clients need to refer to the terms and conditions. The amount of refunds, in any case, depends upon the kind of insurance taken. The claims reimburse only that amount, which is prepaid and not refunded by the vendors.

Trip Wise Choice

There are single trip coverage plans, multi-trip coverage plans. Some providers also offer yearly travel coverage.

Single Trip – occasional travel on the year. TIP: It is good to buy an Insurance for the duration that exceeds the trip days, just in case of any unforeseen delays.
Multi-Trip – Multiple trips in a year. Each Trip is lasting for less than 30 days.
Yearly coverage – Frequent travelers, valid for the whole year.

Plans and packages vary with different kinds of providers. It is good to check the terms with your provider.

Policy Types

COMPREHENSIVE PACKAGE PLAN –

This is the most common Travel Insurance that covers almost all aspects. Such plans usually cover:

Canceled / Interrupted Trips
Medical Emergency
Emergency Evacuations
Lost/Damaged Baggage
Flight/ Baggage Delays

This is most appropriate on a Single Trip plan and can be extended to an all-inclusive vacation, cruise, tours, etc.

TRAVEL MEDICAL INSURANCE –

As the name suggests, these policies cover only medical emergencies and evacuations. This is suited for long term travel, where the guest is traveling for long term work/ study etc.

Please Note – Travel Insurance covers only pre-paid, non-refundable expenses.

Premium Calculation

There are various factors considered by an insurance provider to offer the appropriate package. The below components decide the cost of travel insurance –

Age of the traveler
Destination(s) of Travel
Duration of Travel

Certain insurers and packages might require some of the below –

Medical report/ history
Declaring any pre-existing medical condition
Country specific requirements

What all is needed to get an Insurance policy quotation?

Departure and return dates
The total pre-paid, non-refundable trip amount
Date of first payment towards the trip
If multiple countries, list the first itinerary country
Traveler ages at time of quote

Where to Buy from?

It is nice to have a tie-up between your organization and some Insurance provider that can help you earn a commission on the policy sold. However, in the absence of the same, you can assist your clients through below –

AIRLINES/ RAILWAYS –

Airlines also offer travel insurance packages while booking the tickets. Their basic plans usually cover for cancellations, loss of baggage, and medical reimbursements.

IRCTC and EuroRail also offer Travel Insurance policies.

CREDIT CARD –

Many credit cards now include a certain kind of Travel Insurance. As a travel advisor, you must ask your clients to check such benefits first. This will help them buy an insurance package that covers the components not covered by the Credit Card policy.

BANK –

It is also a good idea to check for the plans offered by one’s bank. Banks tend to offer an excellent quotation to their long-standing customers. However, it is still best to compare their quotes with the Insurance Companies.

INSURANCE COMPANIES –

Numerous companies are offering Travel Insurance, including banks, private entities, Life Insurance companies, etc. It is highly essential to buy a policy from an authorized vendor. Ensure to check that the company is registered with IRDA (or the regulatory authority of your country).

FREELANCE BROKER –

Many companies authorize private brokers to sell their policies. In this case, it is vital to check the ID or authorization of the private broker/seller.

In any case, it is best to tie up with an Insurance company to serve your clients.

Important Points to Consider

FINE PRINT –

Just like any other policy, it is essential to read the fine prints to learn the Terms and Conditions of the policy. Read the brochure/ prospectus properly to be able to take advantage of the policy if and when the need arises.

COVER –

It is important to check the exact amount of cover and the heads under which the amount(s) fall.

Although it might be tempting to choose a cover worth the amount for the whole trip, it will end up increasing your quotation. The best practice is to get a cover worth only the pre-paid non-refundable components. This is because the insurance will anyway not pay for what has not been paid for and what has been refunded by the vendors.

PRE-EXISTING CONDITIONS –

In case your client has any pre-existing medical conditions that s/he may want to get insured for, it is important to upgrade their plan. Please Note – Insurance does not include

Take a Quiz