Planning to travel? Here’s why you need to insure your next trip

When Covid-19 hit early last year and most travel ground to halt worldwide, would-be vacationers scrambled to get refunds from hotels, airlines, cruise lines and other travel suppliers — or to file travel insurance claims for canceled trips.

They often hit a wall on both fronts. Suppliers struggled, or sometimes stonewalled, with refunds — making those without insurance wish they’d bought some. Meanwhile, the “insured” often discovered the plans they’d purchased didn’t cover Covid-related travel or medical expenses.

“People were trying to get their money back, trying to navigate through credits versus refunds, and put in travel insurance claims,” said James Ferrara, co-founder and president of the Delray Beach, Florida-based InteleTravel network of some 60,000 home-based travel advisors. “They were also looking at travel insurance for their next [trip] and making sure that insurance would cover another occurrence of a pandemic because this all caught a lot of people by surprise — including the insurance industry.”

More from Personal Finance:
Theme parks, fans still keen on high-tech tools developed during Covid
Here’s why you might want to book that vacation with a travel advisor
Price outweighs pandemic fears as Americans look to book travel again

In the wake of those epic “burns,” many Americans once again hitting the road now that pandemic-era restrictions are being lifted are insuring their trips — and their health — as they plan travel. They’re doing so both to avoid future trouble and, in some cases, because they have to. More than two dozen countries, for example, require visitors to have medical and sometimes travel expenses coverage that includes Covid-related incidents.

“There was a good handful before [Covid], but more now,” said Megan Moncrief, chief marketing officer and data specialist at trip insurance comparison site Squaremouth.com. “It makes sense when you think about how expensive getting care abroad can be.”

Squaremouth, based in St. Petersburg, Florida, maintains an online list of about 26 countries that currently require visitors to have Covid-specific medical coverage. (U.S. health insurance plans generally do not cover medical care abroad.)  

In addition, to visit Dubai, for example, you need at least $100,000 in general emergency medical coverage and $50,000 for medical evacuation. And for trips to Antarctica, where different nations control different areas, tour operators often require at least $100,000 in both medical coverage and evacuation expenses.

The amounts are warranted. Jeremy Murchland, president of travel insurer Seven Corners, said his team regularly helps with evacuations and “we’ve had a couple of cases in the last year that have exceeded six figures.”

It’s not just destinations and tour operators requiring coverage. In the hard-hit cruise industry, Royal Caribbean Cruises announced that unvaccinated passengers must buy travel insurance, CNBC has reported. “There’s going to be a [push] from travel suppliers,” Moncrief said. “But we’ve seen [sales] almost 100% from consumers who are just kind of shell-shocked and wanting to know what their coverage options are.”

In June 2020, Indianapolis-based Seven Corners was among the first to offer Covid-specific medical coverage, as part of three plans targeted at international travelers, students and frequent travelers. (The company, which sells both comprehensive travel insurance policies and medical coverage-only plans, has also introduced a new Claims Your Way service that pairs customers with their own agent to ease the claims process.)

Last month, Squaremouth, for its part, saw travel insurance sales surpass those for June 2019, with a 14% rise. Compared to June 2020, when virtually no one was traveling, sales soared 466%. “There’s certainly a big rebound happening, which I think is great for the industry,” said Moncrief.

Customer demographics have shifted, however. Baby boomers and older travelers — once industry mainstays — haven’t come back, she noted. “We’re seeing a younger demographic, about 10 years younger than our historic average,” Moncrief said. “Right now, we’re seeing people in their early 40s really driving travel insurance purchases.

Similarly, Seven Corners’ data shows the average age of a trip-protection plan purchaser is 43, while that of clients buying a medical-only trip plan is a bit younger at 39. (In 2020, about 87% of all claims Seven Corners received were for trip cancellation only, the firm said.)

“It’s really everyone who had some kind of cancellation happen [last year] … and now they’re looking into travel insurance, or they’re required to buy it,” Moncrief said, noting that at one point in the pandemic, travelers up to age 21 were Squaremouth’s biggest client demographic. “It was crazy to see that shift,” she said. “When have they ever bought travel insurance before? But they were the only ones traveling.”

At Seven Corners, policy sales are only about 10% lower than in 2019, even though the latest industry forecasts predict international travel in 2021 will reach just 40% to 50% of the numbers posted two years ago, according to Murchland. “What that’s telling us is that the ‘attach rates’ are much higher,” he said. “More people are aware of travel insurance and of the need for it.”

Health and safety are now top concerns among travelers of all ages, and even those taking domestic trips, according to InteleTravel’s Ferrara. “If I’m going to travel now, what is the hotel, cruise line or tour operator doing to protect me?” he said. Travelers also wonder what’s expected of them on arrival, in terms of vaccine credentials and Covid testing requirements, and worry about costs and being able to file claims if they have to cancel.

Standard, traditional travel insurance plans often required purchasers themselves to contract Covid in order to get a refund on trips; sick family members, canceled flights, state-imposed quarantines, job loss and so on didn’t qualify. Indeed, only 30% of Covid-related claims Squaremouth has seen were due to policy holders getting ill themselves; the other 70% were due to other factors, like border closures.

Murchland at Seven Corners explained that a case of the nerves doesn’t fit the bill for claims, either. “Quite a few people had travel booked for later last year and said ‘Hey, I’m nervous, don’t want to travel and … I am going to cancel my trip,'” he said. “But being nervous or scared of travel usually isn’t going to be a covered trigger in the basic insurance policy.”

Since insurers often do have byzantine rules around whether a canceled trip is covered, Squaremouth is now seeing sales of so-called cancel for any reason plans skyrocket. Sales are up 165% from 2019, said Moncrief. For its part, Seven Corners saw a 180% increase in the sale of such plans last year compared to 2019, and the trend has continued into 2021.True to their name, these generally more expensive plans offer no-questions-asked reimbursement for canceled trips.

“We never recommended cancel for any reason prior to Covid because of the big premium increase,” she said, but people want it. “It feels like we’re getting out of [the pandemic] but even now … travelers are just like ‘I don’t know what’s going to happen’ and they’re purchasing cancel for any reason.”

Will demand fade with time, as the pandemic hopefully recedes into memory? Moncrief thinks not. “How will we react to next pandemic?” she said. “No one knows the answers, and for that reason I think interest in travel insurance is going to stay high.”

Those new coverage requirements from travel suppliers might last, as well, she said. “Cruise lines, tour operators and airlines can only sustain refunding for so long; they need another option.”

Murchland noted that, pre-Covid, only about 30% of U.S. travelers bought trip insurance — compared to 60% of people, for example, in Europe — but that the severity of the pandemic has caused a shift. “Because Covid has lasted so long, I do think there’s going to be staying power; to what degree, time will tell,” he said. “I don’t think it’s something that’s going to go away as we head into next year.”

Ferrara at InteleTravel is less certain. “We Americans have short memories,” he said, noting an initial spike in Google searches for travel insurance at the start of Covid “had fallen through the floor” within six to eight months. “It’s partly a defense mechanism of ours as human beings — we just don’t want to think about this.

“While I’d like to say there’s going to be increased travel insurance purchasing, I’m not so sure.”