Personal Finance

Travel Insurance Vs. Credit Cards: Travel Coverage Comparison

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  • Travel insurance and some credit cards can protect you against financial loss while traveling.
  • Travel insurance offers more comprehensive coverage that protects you on one or more trips.
  • Credit cards can cover trip cancellations, lost luggage and other occurrences on trips booked with your card.

Anything can happen while travelling. Flight delays, lost luggage or even unexpected injury or illness. When these events occur, travel insurance or the travel protections included with your premium credit card may be able to help you, by providing medical coverage, compensating for your financial losses or even reimbursing you in full.

But do you need both travel insurance and credit card travel protection? Here are details on both and tips for deciding which is best for your trip.

Travel insurance vs credit card travel protections: at a glance

Many credit cards offer travel protections that can help you in certain unforeseen travel situations. But they are not exactly the same as a separate travel insurance policy.

Here’s how the two differ at a high level:

  • Travel insurance: Travel insurance is coverage that you purchase either for a single trip or for multiple trips in a year. It generally covers the costs associated with trip cancellation, trip delay, medical emergency and some other unforeseen events that may occur during the trip.
  • Credit card travel protections: These are benefits automatically included with some consumer credit cards. They often provide coverage for delays, lost luggage, collisions with rental cars, and other events during travel. Sometimes credit cards advertise these protections as a type of travel insurance, although they are not actually a separate insurance policy.

Generally speaking, designated travel insurance is more comprehensive than the protections offered by a credit card. Still, it’s worth comparing the two options, especially if you’re on an expensive trip.

“It’s always wise to check your credit card protection against a travel insurance plan,” says Carol Mueller, vice president of Berkshire Hathaway Travel Protection. “Credit card protection may not include the full, bundled, comprehensive coverage that a travel insurance plan would.”

What is travel insurance?

Travel insurance protects you from financial losses related to travel. “There are three main areas of coverage: protecting yourself, protecting your belongings, and protecting your investment,” says Christina Tunnah, managing director of Americas and global marketing at World Nomads, a provider of travel insurance and security services.

Travel insurance works like any other insurance policy. When a covered event occurs, such as the cancellation of your trip or an injury while traveling, you file a claim with your insurer. If accepted, the company reimburses you for the costs up to your coverage limits.

“Most people have no idea that their health insurance doesn’t cover them abroad,” says Shane Mahoney, founder of Lugos Travel, a travel advisory. “So a broken arm from a slip and fall or a heart attack can be financially devastating.”

There are single trip travel insurance policies and annual travel insurance plans, which cover all your trips within a 12 month period. According to Meghan Walch, product manager for insurance comparison site InsureMyTrip, single trip insurance policies tend to cost between 4% and 10% of your total prepaid, non-refundable travel expenses. So, for a trip that costs you $10,000 to book, you’ll pay around $400 to $1,000 for insurance, depending on the coverages you want.

Aside from the added cost associated with travel insurance, the main difference between these policies and credit card protections is that an insurance policy will generally cover the traveler’s emergency medical expenses and evacuation costs for necessary medical care.

“Some travel insurance policies also provide epidemic coverage endorsements, which provide coverage for customers who become ill with COVID-19 or a future epidemic, are individually quarantined, or are denied boarding due to a suspected illness,” says Daniel Durazo, director of external communications at Allianz Partners, a travel insurance provider.

Separate travel insurance policies also tend to offer stronger cancellation cover. In many cases, credit card coverage caps reimbursement at just $10,000 per trip, while travel insurance often goes up to $100,000. Most credit cards will also only cover travel purchased with the card or its rewards points.

Example of travel insurance

According to Tunnah, the medical protections provided with travel insurance “cover accidental injuries and illnesses, such as tripping on a cobbled street in Croatia or getting food poisoning in Thailand.”

If any of the above events were to happen to you during your trip, you would file a claim with your insurance company, either by calling an agent, submitting a claim by mail or fax, or using the website or the insurer’s mobile application. You usually need to do this within 90 days of the event, but the sooner you can file, the better.

When submitting a claim, you must also provide proof of your financial loss – a receipt from the medical clinic you used or a medical statement from the doctor. Once the application has been reviewed and approved, you will receive a reimbursement payment, usually by check sent to your home.

What are credit card travel protections?

Many premium credit cards offer travel protections to cardholders, but the exact coverages depend on the credit card. As a general rule, only trips booked with this card are covered.

“Credit card travel insurance has a big advantage that travelers are interested in: it’s usually free or included in the card’s annual fee,” says Durazo. “Credit card travel benefits can be useful for the little things, like travel delays or lost luggage, but only travel insurance offers reliable protection in the event of a real emergency, like costly medical emergencies like than hospital visits and evacuations.”

In some cases, however, a credit card can cover catastrophic accidents. Chase Sapphire, for example, provides coverage worth $100,000 for an accident resulting in death, speech, hearing, or use of a hand, among other life-changing injuries.

Also, credit card coverage limits tend to be much lower. The Sapphire Card offers up to $20,000 per trip in cancellation coverage, while a basic travel insurance plan from Travel Guard provides five times the coverage.

Example of credit card travel protections

Your credit card’s travel protections could be useful if an airline loses your luggage. In this scenario, you would file a claim with the carrier and then your credit card issuer. Once approved, they will refund you the full value of the lost items, less any refund you received from the carrier.

For these types of claims, you will typically need to submit your claim form with a travel itinerary, proof of your claim with the carrier, copies of any associated receipts (for your checked baggage charges, for example) and copies receipts for any replacement item such as a new suitcase, wallet or other item lost by the carrier.

The bottom line

Travel insurance and credit card protections can come in handy if your trip is canceled or you suffer other losses during your trip, but the right choice will depend on the specifics of your trip and your budget.

“Every trip is different, and every traveler has different needs and concerns,” says Walch. “For a short trip to the United States with a family member, the travel insurance offered through the credit card may suffice. However, if you are traveling abroad or going on a longer vacation and you worry about unknown emergency medical bills or losing money due to cancellation, then you might want to consider a traditional travel insurance policy.”

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