Purchasing travel insurance

A travel insurance policy offers two basic coverages: trip cancellation/interruption and emergency medical evacuation. You may find reimbursement benefits for lost baggage and trip delays, but if they aren't bundled with the plan, you shouldn't add them. These benefits are usually not good buys.

If you do not have health insurance, you should look into a medical or hospital coverage that will cover you when you are abroad. Read through the health insurance policy carefully to see if it will cover your destination area.

Trip cancellation or interruption coverage will reimburse you for any deposits that are nonrefundable if you are unable to go on the vacation or are required to leave early. However, the reason you cancel or leave must be a covered reason. You must read the fine print to find out what is and what isn't covered.

Some cancellation or interruption policies will cover medical reasons, while some exclude any pre-existing medical conditions. Because the policy pays the difference between what you are refunded from the cruise company, tour agency or airline and what you originally paid, you must first seek a refund with the company before you can file a claim on your insurance.

The policy may also cover "unforeseen" emergencies, such as a traffic accident, a hijacking, natural disaster, fire or flood. Some policies will even cover a call to jury duty. However, they probably won't cover a simple change of plans, job problems or personal problems. Travel insurance policies also exclude self-inflicted injuries and drug problems.

If your cruise company or touring agency goes out of business, your policy may cover your losses. But if you purchased the policy from the company, you probably won't see your money. Some insurance policies require the company to file for bankruptcy. Often, touring companies never file for bankruptcy - they simply disappear. If you operator only closes down for a few days, you may not be covered for the loss.

Emergency medical evacuation coverage will pay the cost of transporting you from location of an accident or illness to your home. This coverage comes in really handy for helicopter rescues, which often cost as much as $20,000. It also covers the cost of your trip back to the states. Emergency medical evacuation coverage is ideal for adventure vacations or remote area vacations.

When traveling out of the country it is a good idea to have your vaccinations up to date, an emergency kit with you and quality medical coverage. First, check with your health insurance plan to find out what benefits apply when you abroad.

If you don't have health coverage when you are traveling, you will want to look for a travel insurance policy that includes medical coverage. You will probably find the best buy from policies that bundle trip cancellation or interruption with emergency medical evacuation coverage. Find out if the policy pays for the medical coverage up front, if you have to get approval from the insurance company before you can get care, and if there is a referral line you can call. Don't fall for sales pitches that play on your fears, read the fine print carefully.

How much should you pay?

Comprehensive travel insurance policies, which include travel medical coverage, medical evacuation and trip cancellation or interruption insurance, usually cost between 5% and 7% of the overall cost of the trip. The premiums are based on your age, the cost of the trip, the amount of medical insurance you choose and the baggage-replacement insurance. Where you are traveling doesn't factor into the price as much as you would expect it to.

If you are traveling to England on a full-blown luxury tour for $5,000 a person, it will cost you around $350 to insure your vacation. And if you are planning to tour the African Serengeti, it will still cost you around $350 in insurance premium.

Where to purchase travel insurance

Most travel agencies, cruise lines and tour companies will offer to sell you travel insurance. While the prices are often better through the tour company, the coverage will carry more exclusions. Plus, if the company goes under, you probably won't be able to collect. It is usually safest to buy your travel insurance directly from a reputable insurance company.