Should I buy trip insurance?

Vacations are great. But they are also expensive. American Express did a study in 2013 that showed that the average per person cost of a vacation amounts to $1,145. For a family of four, that amounts to $4,580. And the cost has probably risen since that study was published five years ago. I would guess that it is $5,000 on average now.

With the high cost of vacations, many seek protection for their "investment" in fun by purchasing trip insurance. There are all sorts of problems that can delay or prevent a vacation. The most common problem seems to be illness, especially when there are small children involved. Weather, job loss, change of work obligations and other events can also prevent or delay the vacation. With these possibilities in mind, some people choose to purchase trip insurance for the vacation. For around one or two hundred dollars, trip insurance provides some peace of mind.

Many travel related websites automatically prompt one to consider purchasing trip insurance when purchasing tickets, making reservations, etc. The websites usually just provide a brief summary of the insurance coverage. One has to click on a link or multiple links to get to the details of the coverage. Customers often read too much into the artfully worded summary and assume that the coverage is sufficient for their trip.

However, one should be cautious when purchasing trip insurance. Trip insurance is very limited  and will not always cover what one expects it to cover. Furthermore, there are specific requirements that have to be met for the insurance to be effective. If one is lacking in any of the requirements, the insurance company can reject a claim for reimbursement.

The most common misconception seems to be coverage for illness. This type of coverage typically only applies if someone in the party is too sick to participate in the vacation and, this is the important part, a doctor makes that determination in writing. There is usually a deadline for one to visit the doctor and get instructions in writing. This coverage can easily be lost if one does not make that visit to the doctor's office in time. It may seem a waste of time to go to the doctor's office if one already knows what the illness is and is treating it. (i.e. high fever in a child.) So some will not go to the doctor, or not go soon enough and thus lose the coverage.

Another misconception is about weather conditions. Trip insurance usually has very specific requirements about when coverage applies for vacation cancellation due to weather conditions. For example, for ski trips, the coverage might apply only when less than 50% of the resort's ski runs are open due to lack of snow.

There are other basic requirements. Trip insurance is not allowed to residents of every state. I have seen insurance that was not available to Colorado residents. Another requirement is the purchase deadline. Trip insurance has to be purchased well in advance of the vacation. Despite this, some websites will offer the trip insurance even when it is not effective.

Trip insurance has its place. Before one buys, they should know exactly what they are purchasing and the restrictions on the coverage. If one needs to cancel a vacation they should immediately check the coverage requirements and follow the written instructions for obtaining the coverage.

The bottom line: Take five minutes and read the small print before you buy.