Sometimes, it pays to hedge your bets. Insurance is one example of hedging your bets; spending a little money now, to save a lot of money later.

In this series on hedging your bets, we'll explore various types of insurance, how to evaluate whether they're good investments, and ways to structure your policy.


Anything can happen on the road, and an unexpected emergency can cost you a bundle, especially when expensive flights and/or evacuation from remote locations is involved.

But not all travel insurance policies are created equal, nor do you necessarily need all kinds of travel insurance. Here are the basics.

3 Components to Travel Insurance

Travel insurance has three elements. Some policies are comprehensive, and others only cover one or two of these components.

Trip Cancellation

Trip cancellation insurance is usually offered by airlines and travel agencies when booking your flight. (It's also available through comprehensive private policies, which are preferable). If you need to cancel or cut short your trip due to a personal or family medical emergency, trip cancellation insurance refunds all or part of your non-refundable travel costs.

This form of travel insurance may not seem very expensive, but it's also not easy to claim for. If you are taking expensive long-haul flights, it may be worthwhile.

Baggage Loss/Theft

If your stuff is lost, damaged, or stolen, this type of travel insurance will reimburse you. Insurance companies valuate your belongings a few different ways, and they often exclude certain items or anything over a certain value. Unless you are traveling with specific high-value items requiring special coverage, this isn't normally a bet worth hedging.


This is the most expensive of the three types of travel insurance, but also the most valuable. If you have a medical emergency due to an accident or illness, your medical expenses are covered. Often, pre-existing conditions (illnesses you had symptoms of prior to traveling) aren't covered, and traveling through a war zone or participating in certain hazardous sports can also be problematic when making a claim.

Medical travel insurance policies vary widely, so it's crucial that you read it through carefully before buying.

Annual Policies vs Trip Policies

Trip policies cover you for a specific trip. Your quote depends on where you're going, for how long, and what activities you plan on doing. (For example, not all travel insurance policies cover scuba diving).

If you travel multiple times a year, you might want an annual travel insurance policy, allowing you to travel for a total number of days annually, each trip being up to a certain duration. Some annual policies cover full-time or long-term travel, although depending on how long you travel, you may want to consider international health insurance instead.

Making a Claim

Be prepared to work for your travel insurance claim.

Keep all your receipts - for everything, and copy them before submitting your claim. You may need to produce original receipts for items claimed on baggage loss/theft insurance, or some other form of proof (such as pictures) that you owned the items. (This is why baggage loss/theft insurance is often more hassle than it's worth).

For medical claims, the more organized you are, the better. Get official receipts and medical reports. In many cases, in-patient hospital care is paid directly by the insurance company, assuming you are at an insurance-approved hospital. (Read on for what to do in an emergency to ensure you go to the right hospital).

Lastly, expect the insurance company to fight your claim, and to make mistakes. I've made a few travel insurance claims, and none of them have been easy. I've called in many times, and escalated repeatedly to managers. Even blatant reimbursement mistakes have been difficult to fix. Luckily, I kept copies of everything I submitted and could reference them while talking to the insurance company.

Read Your Policy

It's imperative that you know your policy before getting into a claim situation. Reference your policy throughout the claims process, since insurance companies can be slippery both in the wording and interpretation of clauses.

Traveling With Your Policy

Keep your insurance information (insurance company, policy type and number, and insurance contact numbers) with you at all times, since you never know when disaster will strike. Give traveling companions your policy information as well, and/or somebody back home who can advocate for you.

What to Do in an Emergency

Call the insurance company right away! In some cases, they'll deny coverage if you wait to call. Also, they may be able to direct you to a company-approved hospital or provide emergency assistance.

Where to Get Travel Insurance

It's good to compare travel insurance policies from a few different companies, which means using a broker who can shop for you and help you apply.

You might already have travel insurance with your credit card; one of a few reasons why traveling with credit cards can be advantageous.

Hedging Your Bets: Is Travel Insurance Worthwhile?

I've made travel insurance claims for both illnesses and accidents, totalling thousands of dollars in expenses that I would otherwise have been out-of-pocket for. I've never claimed for baggage loss/theft, but I've gotten more than my money's worth from trip cancellation and medical components. I wouldn't leave home without it.


Travel Insurance You Already Have With Your Credit Card

7 Unsatisfying But Necessary Travel Expenses to Budget For

Travel Insurance: Don't Leave Home Without It

Nora Dunn, travel and lifestyle expert guest blogger for leading provider of debt relief, CareOne Services, Inc. Nora Dunn

Nora Dunn is The Professional Hobo: a full-time traveler and freelance writer. Having sold her business and belongings to travel, she has been on the road since 2007. She travels in a financially sustainable manner, specializing in creative travel strategies like getting free accommodation and flying in business class for less than economy prices; all the while earning income with her location independent career.

As a former Certified Financial Planner, she is financially responsible for her actions along the way. She believes there is a fine balance between planning for tomorrow, and living for today.

She has penned the book How to Get Free Accommodation Around the World, is contributing author to the book 10,001 Ways to Live Large on a Small Budget, and a regular columnist for Wise BreadTransitions Abroad, Credit Walk and many other publications.

Please enjoy her articles on the topics of travel, personal finance, and lifestyle design.

You can also connect with Nora on Facebook, Twitter, and Google + Nora Dunn