Travel Medical Insurance

If you have traveled overseas with a tour group or made overseas travel arrangements through a travel agency, you’ve probably purchased “travel insurance”, albeit inadvertently. Travel insurance combines different types of insurance together to protect you against unpleasantries such as travel delay, travel cancellation, lost luggage, terrorism, becoming sick or injured during your trip, and the financial instability of tour operators. (For help avoiding long airport lines, another travel related inconvenience, please see Another Way to Get from Point A to Point B: Looking at Private Jet Travel in our 3rd Quarter 2006 Wealth Management Commentary.)

If you buy such a travel insurance “package” it can cost approximately 5% to 10% of the cost of your trip, depending on your age. Travel insurance typically offers more robust coverage for your property (lost luggage, the forfeited cost of a trip) than it does for your physical well being. While loosing your luggage or having a tour operator fail is annoying and could be costly, the stakes are a lot higher, both physically and financially, if you become sick or injured overseas with little or no medical coverage.

Travel baggage insurance is probably superfluous

Travel baggage insurance reimburses you if your belongings are lost, stolen or damaged. This type of insurance is most likely superfluous because your belongings are already covered by your homeowner’s insurance and, perhaps, even by a credit card company.

AIG, Chubb, Fireman’s Fund and Traveler’s homeowner’s insurance provide world wide coverage for your property, subject to your (probably very high) deductible. If your valuables have blanket insurance coverage, your loss isn’t subject to a deductible. Moreover, if you paid for your trip with an elite level of credit card, the credit card company might also insure your belongings. Check with your homeowner’s insurer, then your credit card company to determine your specific coverage.

Trip cancellation and interruption insurance is also probably not worth it

Trip cancellation and interruption insurance reimburses you for the cost of your trip if it is aborted for a medical reason. Many of these policies do not cover pre-existing conditions and generally aren’t worth purchasing.

But, travel medical insurance fills what is likely to be a huge gap in your medical coverage

When evaluating the need for any insurance, the first question to ask is, “Do I need it?” In the case of travel medical insurance, the answer is probably yes. Medicare does not cover overseas medical expenses and Medicare supplement policies are capped at a lifetime maximum of $50,000. Depending on where you are traveling and the severity of your illness or injury, it isn’t hard to imagine breaching that ceiling. HMOs and PPOs cover only “emergencies” or “life threatening” illnesses or injuries abroad. None of them pay for medical evacuation. Travel medical insurance takes the place of your primary medical coverage outside the US. Before you leave the country, you can check with your health insurance company to find out the particular details of your medical coverage.

Medical evacuation insurance is included in travel medical insurance

Medical evacuation insurance pays for medical transportation to take you back home. Most travel medical insurance policies include medical evacuation coverage. Stand alone “medical evacuation” policies, however, do not cover hospital or doctor expenses prior to your evacuation. We recommend selecting a comprehensive travel medical insurance policy with its broader coverage, including medical evacuation, instead of a stand-alone medical evacuation policy.

Travel medical insurance is an inexpensive safety net

If you do require medical attention outside the United States, and you don’t have travel medical insurance, you are responsible for paying any medical expenses out of your own pocket and then seeking reimbursement, to the extent your expenses are reimbursable, from your health insurer. You will have to navigate the local health care system either on your own or with help from friends or the local US Consulate. Furthermore, your existing health insurance will probably not pay for a medical evacuation. Even if you are traveling on business, acquiring this coverage can avoid the risks and logistical burdens of relying on worker’s compensation to provide primary coverage.

Travel medical insurance acts as your primary insurance outside of the United States. It can cover up to $2 million worth of medical expenses including medical evacuation for periods ranging from one day to 12 months. In some instances, you can obtain travel medical insurance for longer periods of time. The travel medical insurance company acts as your health care advocate which can be useful if you don’t speak the local language or aren’t familiar with the local health care system. Travel medical insurance is very inexpensive, so it is probably worth it if just for the peace of mind.

This conclusion operates as well in reverse for foreign travelers to the US. Moving from a government-provided, universal health care system to our primarily private insurance supported system can be a shocking surprise for the unprepared.

$500,000 worth of travel medical and medical evacuation coverage for one person costs:

Not surprisingly, premiums increase and benefits decrease with age. From ages 70 to 79, the amount of travel medical insurance you can obtain is limited to $50,000 and the premium cost ranges from $54 for one week to $2,700 for a full year. From ages 80 to 84 your coverage is limited to $10,000 and premium costs range from $100 for one week to $5,000 for a full year. Beyond age 79, travel medical insurance isn’t as attractive, but despite the lower benefit amount, the insurer’s services in coordinating care could easily be worth the premium all by itself.

Not just for older travelers

Another consideration in purchasing travel medical insurance are the types of activities in which you participate while on vacation. If they include scuba diving, surfing, sky diving, parasailing, spelunking, whitewater rafting or mountain climbing, to name just a few, you need to ensure that these “leisure” activities are not excluded from your travel medical insurance policy. Insurance companies tend to view these activities as “high risk”. If, instead, your travel plans involve BASE jumping or running with the bulls, consider treating yourself to the mental health benefits of your domestic health insurance policy before you leave on vacation.

Conclusion

In our view, travel medical insurance is too valuable a resource and too inexpensive to overlook. Here are three travel medical insurance brokers:

www.insurancetogo.com
www.insuremytrip.com
www.squaremouth.com

We recommend at least $150,000 of combined medical and medical evacuation coverage depending on your destination. If you prefer more coverage, this is one of the few areas where we won’t dissuade you. If you purchase travel medical insurance as part of a broader travel insurance package, you’re probably buying some aspects of coverage you don’t really need, but at least make sure that the medical benefits are robust.

Brett Gookin,
with special technical and research assistance provided by Terry Jewell,
Cal Poly, San Luis Obispo, student intern.