What’s wrong with buying cheap travel insurance?

Here’s the short answer: “If it’s cheap, it’s probably too good to be true,” writes travel columnist Christopher Elliott.¹ The less the plan costs, the less it covers.

Of course, you would rather spend your travel budget on a fabulous dinner or a fun excursion than on an insurance plan that—if you’re lucky—you may not even need to use. We get it! But buying the cheapest travel insurance can become an expensive mistake.

The problems with cheap travel insurance

Stingy benefit limits. If the benefit limits are too low, you risk having to pay out of pocket when your losses exceed the limit.

• Example: Your plan has a $250 limit for lost baggage, but that’s nowhere near enough to cover your clothes and other items when your suitcase gets stolen.

A short list of covered reasons. Travel protection plans are generally named perils plans, which means they only cover losses resulting from covered reasons. (A covered reason is a specific situation, circumstance, or event that, when it occurs, means you may be eligible to file a claim.) The cheapest travel insurance plans may have fewer covered reasons, which means they can deny your claim if your situation doesn’t appear on the list.

• Example: You plan a girls’ trip to Jamaica for the spring. Then, you find out you’re pregnant, and the due date is during the trip. Surely that’s a covered reason for trip cancellation? But no—the cheap travel insurance plan you bought won’t cover any claims related to pregnancy.

Insufficient protection for medical emergencies. The #1 biggest financial risk when you’re traveling isn’t losing money to an unexpected cancellation. It’s suffering a medical emergency overseas, where hospitals generally don’t accept U.S. insurance plans and often require cash payment up front. That’s why it can be a mistake to buy the cheapest travel insurance plan for an international trip.

• Example: Your plan includes $10,000 in emergency medical transportation. That sounds like a lot… until you injure yourself in a fall on a remote trail in Nicaragua and must be evacuated by helicopter. The final bill is bigger than your annual salary… and your cheap plan will only pay a fraction of it.

What about credit card travel insurance?

Some credit cards include travel protection for free, or as a perk included with the card’s annual fee. You can’t beat free, right?

Well, you get what you pay for. “Credit cards can offer basic coverage, including for trip interruption, evacuations and lost luggage, but the coverage can be limited,” Elliott explains. He gives the example of a woman who thought her credit card’s travel protection would cover a $14,000 Danube River cruise. When she read the fine print, she realized that the maximum amount covered was only $3,500.

For a short trip in the U.S., your credit card may be able to help with lost luggage and trip delays. But for international trips, it’s essential to have a travel insurance plan that can cover the high costs of trip cancellations and medical emergencies.

Read more: Credit Card Travel Insurance vs. Allianz Travel Insurance

How much should travel insurance cost?

As a rule, a conventional travel insurance plan may cost around 7% to 9% of your prepaid trip costs. If you opt for a “cancel for any reason (CFAR)” plan or “cancel anytime” plan, that will cost more: 10% to 12% of trip costs, on average.²

In general, the cost of a given travel insurance plan depends on two factors:

• Total insured trip cost (for plans with trip interruption/cancellation benefits)
• Older travelers have a higher risk of health problems, so the cost of travel insurance rises with age.

Your destination, your claims history, and your medical history don’t affect the price. If you have a pre-existing medical condition, however, you must meet the requirements in order to be covered.

Read more: When Does Travel Insurance Cover Existing Medical Conditions?

6 ways to save money on travel insurance

1. For U.S. trips, opt for a plan without emergency medical benefits. Emergency medical and emergency transportation benefits are essential for overseas travel, where you may have to pay for care out of pocket if you get sick or injured. But within the United States, your regular health insurance should cover the cost of emergency care. Look at OneTrip Cancellation Plus, an affordable travel insurance plan that omits emergency medical.
2. Choose a plan with lower benefit levels. If you’re heading to western Europe or another international destination where high-quality medical care is easy to access, you may not need $500,000 in emergency transportation benefits. Consider the OneTrip Basic plan instead, which includes $10,000 in emergency transportation plus other key benefits.
3. Skip the trip cancellation benefits. The cost of a travel insurance plan is tied closely to the cost of your trip… unless you choose not to insure your trip costs. If you’re not worried about losing your pre-paid trip expenses, try the OneTrip Emergency Medical plan. You get generous post-departure benefits, but no trip cancellation/interruption benefits. As a result, it’s really affordable.
4. Only insure your non-refundable trip costs. If your hotel lets you cancel the day before your reservation, or if you’re willing to accept flight credit instead of money back for a canceled flight, then you could save money on travel insurance by not insuring those trip costs. One note: In order for losses caused by pre-existing medical conditions to be covered, you must insure the full amount of your trip.
5. Get a plan that covers children for free. OneTrip Prime and OneTrip Premier both can cover children aged 17 and under for free when traveling with a parent or grandparent. (not available on policies issued to Pennsylvania residents).
6. Buy annual travel insurance. It seems counter-intuitive: Can a full year of travel insurance be cheaper than protection for a single trip? If you’re over 75, it may be! An affordable travel insurance choice for seniors is often an annual plan, which can protect all your travel in a 365-day period. That’s because age doesn’t affect the cost. Just be aware that trip cancellation limits are lower for AllTrips plans. Get a quote.

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• The 7 Questions You Need to Ask Before Purchasing Annual Travel Insurance
• 8 Things to Look For When Comparing Travel Insurance
• Your Guide to Choosing the Best Travel Insurance for Your Trip