Travel insurance, often referred to as trip insurance, covers you for unexpected events (such as a hurricane) when you’re travelling (or about to travel). What some people don’t realize is that travel insurance isn’t just for your health. A comprehensive travel insurance package will cover you for other things, including if your luggage is lost, if you need to return home due to an emergency, and more. Trip insurance could even cover you if you fall while hiking and need a helicopter to take you to a hospital.

To be clear, it doesn’t matter if you’re travelling overseas, taking a cruise, or crossing the border for some last-minute shopping. Having travel insurance is a must.

The benefits of travel insurance are obvious, and the cost is relatively low. Yet, many people don’t bother getting it for one reason or another. Travelling without insurance is a huge risk that’s just not worth taking (unless you like paying things out of your own pockets). Here’s everything you need to know about what is travel insurance.

What does travel insurance cover?

The first thing to understand is that travel insurance plans covers many different things. There can easily be about ten different things that fall under travel insurance, but not every policy covers everything. The more coverage you get, the more it’ll cost you, but overall, trip insurance does not cost that much. Here are the types of travel insurance you need to know about.

Travel medical

Travel medical emergency insurance is an absolute must-have when travelling since it covers the basics, such as a visit to the doctor or hospital for an illness or sickness. It also covers emergency services such as ambulance rides and emergency evacuations. Never travel without travel medical coverage since medical expenses can add up fast. Note that your provincial health insurance does not cover you for much when you travel outside of Canada.

Trip cancellation/interruption (trip delay)

Unfortunately, sometimes things happen that leave us with no choice but to cancel our travel plans. Assuming it’s for a qualifying reason (such as jury duty), trip cancellation insurance will reimburse your travel costs. To clarify, trip cancellation coverage refers to before you depart, while interruption applies if you need to end your trip early. With trip interruption coverage, you can get some money back if you need to return home due to a qualifying reason.

Flight delay

If your flight is delayed, you’ll usually get up to a certain amount to spend on things to keep you comfortable. For example, if your travel delay was for 4 hours, you could get up to $1,000 to spend on food, hotels, and even entertainment.

Baggage insurance

Delayed baggage insurance is often overlooked, but you’ll be glad you have it if yours is ever delayed, lost, or stolen. Every policy is different, but if your luggage is delayed for a certain amount of time (usually 4-6 hours), you’ll qualify for a set amount of money that you can use to make purchases. Baggage loss is one of the most frustrating things. That’s why you need to have insurance.

Rental car 

If you rent a car, you’re going to need insurance. Many travel insurance policies or even your regular auto insurance policy already include this coverage. Be aware that to qualify for this insurance, you usually need to decline the optional insurance that the rental car company offers.

Hotel/motel burglary 

This one is pretty straightforward. If your personal belongings are stolen from your hotel, you’ll be entitled to make a claim if you’re insured. Keep in mind that your regular home insurance often covers any lost or stolen personal items while you travel.

Accidental death & dismemberment

AD&D (sometimes known as travel accident) gives you (or your next of kin) a set amount if you lose one of your limbs or pass away while travelling. Obviously, this is something you would prefer not to make a claim on.

What does travel insurance coverage not cover?

Every travel insurance policy is different, so don’t assume you’re covered for all of the above when purchasing a plan. There are always exclusions and restrictions. You’ll need to read the formal paperwork so you’ll know exactly what you’re covered for. There are also limits to how much you can claim. For example, trip cancellation might only cover up to $10,000 in total. Or, lost luggage is only good, up to $500 per person. In other words, it’s possible that travel insurance won’t cover your trip.

Keep in mind that having a policy doesn’t guarantee you coverage. For example, most travel insurance policies are void if you travel to a country with a travel advisory from the Canadian government, such as Afghanistan. It may also not cover you if you do something extreme such as bungee jumping or skydiving.

It’s also worth noting that if you’re relying on credit card travel insurance, it usually has strict conditions such as the length of the travel, the age of passengers, and what you’re entitled to. You may also have to charge a certain amount of your trip expenses to your card to be insured. For example, some credit cards require you to charge 100% of your trip expenses for your policy to be valid. Again, always read the paperwork so you know what you’re entitled to.

Other things that may not be covered include the following:

• Pre-existing medical conditions
• Travel assistance services that have a fee
• Amounts paid out by refund policies
• Exotic vehicles and trucks
• Coronavirus (depends on the insurance provider)
• Any extended family member (brother, parents)
• Acts of war or terrorism

Evaluating your needs

At the very least, you need to have travel medical insurance whenever you travel. Basically, if you ever leave your home province, travel insurance is a must. Your provincial healthcare will cover you for some basic medical attention, but only up to the amount that’s approved in your home province. It won’t cover any emergency services, so if you need a helicopter medical evacuation, you’re out of luck.

Even if you’re going to the U.S. for a weekend trip or a day trip for shopping, you’ll need proper insurance. A trip to the doctor will easily cost you $100. If you need more serious medical attention, you could end up spending thousands.

Trip Cancellation/Interruption is technically optional, but it’s something I prefer to have. With most policies, if you’re delayed for 4 hours, you’ll be entitled to a hotel and possibly some spending money. As weird as it sounds, insurance companies are a lot easier to deal with than airlines when there are delays, so I prefer to have peace of mind.

Baggage insurance is another optional insurance that is often hotly debated. Technically speaking, your home insurance covers any valuables that are damaged or lost in your luggage, but that doesn’t help you at the moment. I personally like having baggage insurance since it’s pretty cheap, but I can see why some people would not bother with it.

Can I cancel for any reason?

In most cases, travel insurance can only be claimed when you meet specific conditions. Let’s say you’re set to travel in a week, but you’re suddenly laid off. Most travel insurance policies would allow you to cancel your trip and get your money back (up to the limits outlined in your policy). Now let’s say a day before the trip, you’re just feeling nervous and don’t want to go. You couldn’t just cancel your trip and expect all your money back.

That said, there are cancel for any reason (CFAR) policies available from some insurance providers. They’re rare, and they often cost 50% – 75% of your trip cost. For most people, if you can afford the cost of a CFAR policy, you can likely afford to lose the entire cost of your trip.

Even if you need to cancel your trip and your trip insurance won’t cover you, you may not be completely out of luck. Many airlines will give you a credit, and some hotels don’t charge you until you arrive. You might have to pay some cancellation fees, but it’s unlikely you’d lose everything.

COVID-19 Travel insurance

COVID-19 travel insurance is something that’s still not very common. Not many insurance providers are covering COVID-19. That said, some airlines and hotels have their own insurance policies that would cover you. Of course, this policy only applies when flying specific airlines or staying at specific hotels.

Eventually, the world will be vaccinated, but I wouldn’t be surprised if COVID-19 is not included in future policies. I’m guessing many insurance providers would expect people to get the vaccine, but some people may not get it before they have to travel.

How much does travel insurance cost?

Generally speaking, travel medical insurance only costs a few dollars a day. If you want a comprehensive package that covers all the extras, such as trip cancellation and lost luggage, it’ll cost you a bit more. Keep in mind that your age and medical history could affect the cost.

Instead of buying travel insurance for a single trip, you can just buy an annual multi-trip insurance plan. The cost is about the same as buying two 14-day insurance plans, so if you travel a lot, it could be of good value. Generally speaking, the premiums for a yearly plan will cost you less than $200. You should always shop around and get multiple quotes.

Another advantage of buying a yearly plan is the underwriting process. With yearly plans, your medical condition is assessed at the time of purchase. That means you’ll know what you’re covered for until the policy expires.

If you’re relying on credit card insurance, the underwriting process happens at the time of the claim. Let’s say you have a heart attack while travelling, and you get rushed to the hospital. When the insurance companies do their underwriting, they find out you visited your doctor about chest pains 3 months prior. They could potentially deny your insurance claim and call it a preexisting condition. It may sound extreme, but it can happen.

You might already have travel insurance

The great thing about travel insurance is the fact that you might already have a policy. If you have benefits through your employer, take a look to see if you have travel medical insurance included. Most major employers will have travel medical insurance as a standard policy, but it’s rare that they’ll offer trip cancellation/interruption or anything else.

There are also quite a few credit cards with travel insurance that will usually include travel medical insurance, trip cancellation/interruption, baggage insurance, and accidental death & dismemberment. Travel medical insurance always applies, but to qualify for the other types of insurance. You usually need to charge a certain amount of your travel expenses to your credit card for the policy to be valid.

Keep in mind that credit card travel insurance usually only covers a set period of time, e.g. 10 to 21 days, and it may only cover those under the age of 65. If you’re travelling longer or you’re older than 65, you may need to extend your coverage or purchase a separate policy. Remember, every insurance policy is different. Always read the fine print to find out exactly what you’re covered for.

Making a claim

Every insurer has different requirements when making a claim, so do read the details of your policy to figure out the proper steps. Generally speaking, you should do the following:

Travel medical insurance

• Call your insurance provider as soon as possible, preferably before any procedure is done (this may not be possible)
• Get any documentation possible, e.g. medical records, procedures done, receipts
• If your insurance provider didn’t make the payments directly for your medical care, submit your receipts as soon as possible

Trip cancellation

• Contact your insurance provider and provide evidence that your reason for cancelling your trip falls under your policy details

Trip interruption / baggage insurance

• Contact your insurance provider
• Get documentation from your airline about the delay or lost luggage
• Make your purchases and save all your receipts
• Submit receipts as soon as you can

Rental car insurance insurance

• Decline any insurance from the car rental company
• If you’re in an accident, get the insurance information from the other party involved
• Contact your insurance provider as soon as possible
• Collect anything that will help with your claim, e.g. photos of the accident, police report, witness contact information

Generally speaking, every travel insurance company will have their own method of processing claims. These days, you can usually do things online. Just submit your receipts or medical bills and your travel details (departure dates, flight numbers, etc.), and your claim will be processed. Once your claim has been approved, reimbursement will usually be done by direct deposit, e-transfer, or cheque.

Final thoughts

Now you know what is travel insurance. It’s pretty straightforward once you understand how it works. Look at your employee and credit card benefits first before buying a policy. If you still require coverage, speak to an insurance broker, travel agent or tour operator, as they may be able to find the right travel insurance policy for you. Travel insurance is a must; never travel without it.

Check out other parts of the series below

Part 1: Budgeting for a trip
Part 2: How to pick a vacation destination
Part 3: How to find cheap flights
Part 4: How to save money on hotels
Part 5: How to eat cheap when travelling
Part 6: The best way to exchange money
Part 7: The basics of travel insurance
Part 8: Sticking to your travel budget

Disability insurance comes in a few different forms. There’s short-term disability (STD), long-term disability (LTD), and critical illness. They all cover us from accidents and illness, but how much they pay and what they cover are different. Which policy should we get? Well it would be a good idea to have all of them, but more importantly we should understand what exactly the policies cover.

Short-term disability insurance

Most people confuse this with workers’ compensation, but it’s very different. Workers’ compensation provides us with an income and medical benefits if we’re injured on the job. By claiming worker’s compensation, we give up our rights to sue our employer for negligence; this might be a major issue for some people.

Short-term disability on the other hand will cover our wages in the event of any illness or accident that prevents us from working. STD insurance will pay about 70-90% of our regular income for roughly 90 days. Each policy is different so it’s important to read the fine print of our policies. Some employee plans can be very generous, but we need to make sure that the policy will pay enough for us to maintain our standard of living.

Long-term disability insurance

As the name implies, long-term disability covers any extended amount of time where we’re unable to work; think 90+ days. The payout is lower than STD, and it usually only covers 40-70% of our income. LTD insurance gets packaged with STD so you would get paid out the higher rate first before LTD kicks in. The nice thing about these insurance policies is that it covers us from any accident. Say we slip on some ice and require extended rehab, STD & LTD would help give us peace of mind since we would still have some money coming in.

Similar to STD, knowing our policy details is paramount. Our employer may offer insurance, but will the payout be enough to cover our expenses? Some policies have caps; what that means is that regardless of our income, we may only get paid a fixed amount. This might not be an issue for some people, but it may not be enough for some families so it’s probably worth purchasing a separate policy for the extra payout.

Critical illness insurance

Critical illness insurance pays us a fixed amount in the event we’re diagnosed with a serious life threatening illness. The most common illnesses would be cancer, heart attacks and strokes, but there are other conditions that would also give us a payout. Each illness has an assigned lump sum and even if we survive, we still get paid.

The insurance is meant to help survivors with any immediate medical costs, or to help our family if we pass away. The money does not need to be spent on medical related items, it’s meant to help replace lost income, or to pay off mortgages. Just like STD and LTD insurance, payments aren’t automatic with critical illness insurance; we would still have to make a claim before we can collect our payments.

Final thoughts

Critical illness and disability insurance differ from life insurance since it protects from different things. Having the right insurance policies in place is vital since we’ll never know what will happen in our lives. Our biggest source of income isn’t our jobs, it’s our ability to work. If we’re injured and unable to work, then how will we make an income? Don’t underestimate the value of insuring yourself.

So when should you get a life insurance policy? Well, that’s up for debate, but if you have any dependents, you need to have a policy now. The cost of an insurance policy won’t even break your budget, however, there are quite a few factors that will affect your life insurance premiums.

The underwriting process may seem a bit complicated, but in the end its your age and health that will determine how much you pay.

The factors that affect your life insurance premiums

Age – This is one of the main factor when determining what affects your life insurance premiums. The younger you are, the lower your rates will be. Obviously when you’re younger you have a much lesser chance of dying, so insurance underwriters don’t need to worry about paying your family anytime soon. Even though rates are lower is your younger year, you don’t need to pick up a policy ASAP unless you have dependents.

Gender – Statistics have proven that women live longer, so as a result, their can expect their life insurance premiums to be lower. Women on average live 5 years longer than men, so that’s why they need to save a little more for their retirement compared to men.

Health – Taking a medical exam when purchasing a life insurance policy is pretty standard, and the results help determine what premiums you pay. If you’re in good health, you’ll get the best pricing, but if you have conditions such as high blood pressure or cholesterol , you can expect to pay more. Some insurers may offer “no exam” policies, but those will almost always cost more.

Weight – Similar to your health, weight is a big factor when determining your life insurance premiums. If you’re overweight or obese, you’ll definitely end up paying more. It’s been proven that overweight people experience more health issues and die earlier. These extra risks means more costs for the insurer, which they’ll just pass onto you.

Smoking – Everyone knows that smoking is bad for you, it does some serious damage to your health, and as a result it also ups the cost of life insurance. If you’re a smoker, don’t be too surprised if your premiums are double than non-smokers. If you’re ready to call it quits, many insurance providers will lower your premiums once you’ve been smoke free for a year.

Drinking – Similar to smoking, insurance companies want to know if you’re a heavy drinker. Having the occasional drink is fine and normal, but if you’re a heavy drinker, you and your liver will pay for it.

Your Medication – If you happen to be taking any medication for a serious illness or condition, you better believe that insurance underwriters want to know about it. Many medications can have side effects that affect your health, which in turn will increase your premiums. LSM Insurance has a great article about 5 medications that could affect your life insurance application that’s worth checking out.

Your family history – Unfortunately, your family medical history is pretty important to insurers. If your family has a history of heart disease, cancer, or any other major health condition, you can expect your premiums to go up. Not all insurers will put a heavy emphasis on your family’s medical history, but it’ll still have some kind of impact.

Lifestyle – Do you live life to the max? Does skydiving, race driving, or climbing mountains get your adrenaline going? Well these activities will increase the odds of you dying prematurely so as a result, you’ll pay a premium on your insurance policy. Even if you work a “dangerous” job, there’s a good chance you’ll pay extra.

Final thoughts

Keep in mind that you might already have some life insurance through your employer. The good thing about that is you won’t have to take a medical exam and you can usually top up your coverage. The major downside of course is that if you ever leave your employer, you might be in a position where you’re not insurable due to your current state of health. To fully protect yourself, simply purchase a separate policy.