Travel insurance is not very well understood.
For example, it may not even kick in if you cancel a trip for the wrong reason, experts said.
About 37% of Americans think travel insurance is worth the cost, and 20% actually purchase the coverage, according to a survey by the Princeton Survey Research Associates International and funded by ThePointsGuy.com. About 1,004 adults were interviewed by phone last month for the survey.
Even this group of travel insurance supporters may not fully understand its limitations, said travel blogger Brian Kelly, founder of ThePointsGuy.com, a site that helps consumers make the most of their travel points.
“Trip insurance usually won't reimburse you if you simply change your mind and decide not to go on the trip,” Mr. Kelly said. “A refundable plane ticket is a better bet if you might change your mind.”
The best use of travel insurance is for unexpected situations such as medical emergencies and natural disasters, he said. It's also appropriate for expensive trips to international destinations, especially to countries that have limited access to medical care.
Certain protections also come with travelers' credit cards, said Mr. Kelly, who used to work as a recruiter for a Wall Street firm.
Tony Cardoza, owner of Cardoza Bungey Travel, said insurance is “sort of the flip side of risk tolerance,” in that some clients may be content with knowing that every 10 or 20 trips something might happen to cancel their plans and lose their investment.
Others may want to pay for the travel insurance “as comfort to not have to have that risk or worry.”
Travel insurance would be a waste if the airline charges a moderate fee that would allow the traveler to use the ticket for another trip, or with hotels that allow cancellations within a day or two of the stay, Mr. Cardoza said.
On the other hand, with cruises or tours that are paid for several months in advance, travel insurance becomes more attractive, he said.
“It’s not infrequent that we have people use their trip insurance,” Mr. Cardoza said.
About 52% of those who bought trip insurance said they did so in case their trip had to be canceled, while 27% said it was for the medical coverage in the policies, the survey said.
It’s important to know whether the medical coverage with the policy is primary or secondary. The latter can cause a temporary cash flow problem if a traveler has to pay upfront for the cost of medical costs, Mr. Cardoza said.
Travel insurance rates are based on each traveler’s age, the cost of the trip, and its length.