When Is Your Credit Card's Travel Insurance Good Enough?

People know travel insurance exists because they get the option to buy or decline it when they purchase airfare or book a vacation package. At the very least, many are informed of their credit card's perks and benefits — including travel insurance — when they sign up for a new card. (See also: 6 Types of Travel Insurance Credit Cards Include That You Didn't Know About)

But, many people still don't know how travel insurance actually works. The complexities of travel insurance have made it so that few people understand whether they should buy it or when they actually need it.

This tends to leave travelers with a lot of questions. For example, what does travel insurance cover? And, is the free insurance offered by your travel credit card actually enough to protect you? To find out, we interviewed some travel experts who rely on travel insurance and advise others on how to do the same.

What kind of travel insurance is available?

Travel insurance is a broad term to describe several different types of coverage related to travel. To make sure you're covered in a way that's meaningful both personally and financially, you need to determine the type of coverage you have, what your policy or rewards card covers, and if it's enough. (See also: Everything You Need to Know About Buying Travel Insurance)

Here are the common types of coverage you can secure with a travel insurance policy and/or a rewards credit card that includes it:

  • Trip cancellation coverage — Reimburses you when a trip is canceled for reasons beyond your control

  • Trip interruption coverage — Reimburses you for the unused components of your trip when your trip is interrupted due to a covered reason

  • Emergency medical and dental — This coverage kicks in if you need emergency medical or dental care away from home

  • Emergency medical transportation — This coverage provides emergency medical transportation, including air travel

  • Baggage protection — Receive reimbursement if your baggage is lost, damaged, or stolen during travel

  • Baggage delay coverage — Receive reimbursement for clothing, toiletries, and essential items when delayed baggage necessitates the purchase of these items

  • Travel delay coverage — Provides reimbursement for meals or lodging when your travel is delayed for a covered reason

  • Travel accident coverage — Provides financial reimbursement for death or dismemberment during travel

  • Rental car coverage — Provides coverage for damage due to a collision or theft involving a rental car you pay for with the card

While you can get most of this coverage through a travel insurance policy or certain rewards credit cards, it's important to note that limits and caps can vary dramatically, and may make the coverage insufficient.

Also keep in mind that for your credit card coverage to work, you must have used your card to pay for a major component of your travel such as your airfare. Simply having a credit card in your possession that offers travel insurance coverage is not enough.

When should you rely on travel insurance offered through a credit card?

So, when is it okay to rely on your credit card's travel coverage? While it depends a lot on your specific card, its policies, and your trip details, there are some basic rules of thumb to follow.

According to travel guru Ariana Arghandewal from PointChaser.com, some of the obvious instances when you may be able to rely solely on credit card insurance are for car rentals and checked luggage. That's because rental car insurance and lost luggage coverage are included for cardholders of certain travel credit cards.

Once you confirm the coverage you have by reading your credit card's terms and conditions, you should also check limits to make sure coverage is sufficient. For example, you may find your credit card offers lost baggage insurance with a $500 cap, which may not even be enough to replace your suitcase, let alone your belongings.

If the limits your credit card sets leave you feeling vulnerable, it may be worth looking into buying a travel insurance policy with beefier coverage.

When should you buy a dedicated travel insurance policy?

There are times when any traveler should consider buying a separate travel insurance policy, one of the most common being when they're traveling to a destination where their health insurance coverage is no longer valid.

It's not just getting sick that you need to worry about. You also have to think about motor vehicle accidents, especially if you don't have a personal car insurance policy. If you get hit while driving abroad, not having medical coverage or overseas auto coverage could leave you in a bind.

"Be sure to check with your health insurance company to see if they cover overseas medical expenses before leaving," says Lyn Mettler, who blogs about travel and credit cards at GotoTravelGal.com. "If not, getting a travel insurance policy that covers you in the event of medical issues or emergency is a good idea."

"While most credit card companies will help arrange medical care, they will not pay for it," she says. Some credit cards offer some medical benefits, but the coverage amount is usually so low that it is not a true safeguard.

Adventure travelers in particular should not rely on their credit card coverage, says Arghandewal. If you're planning to scuba dive or sky-dive, you may need to buy travel insurance and then pay extra to cover dangerous activities.

Berkshire Hathaway's ExactCare insurance covers up to $25,000 in emergency medical coverage. "Even pre-existing conditions are covered if insurance is purchased within 15 days of initial trip deposit," she says.

It's also worth noting that, if you are purchasing an expensive, once-in-a-lifetime trip, you may want trip cancellation or interruption insurance with higher limits than you could get with a credit card.

While some credit cards offer trip cancellation and interruption insurance that would work in this case, coverage caps can limit reimbursement to $10,000 or less, depending on the card.

What type of travel insurance is best for families who travel together?

While it's important to figure out travel coverage if you're traversing the globe by yourself or with a friend, traveling with a family in tow could easily raise the stakes. If you're in another country and your child gets sick, for example, you'll need to make sure you have the right coverage to reimburse you for interrupted plans, proper medical care, and potentially getting everyone home early.

Trip cancellation or interruption insurance can work well for families since it can provide reimbursement for travel plans interrupted for by sickness or unplanned disasters.

Even trip cancellation or interruption insurance provided for free through a credit card can work well in this respect, but you should check your card's coverage information.

When traveling with family, it might be best to purchase a travel insurance policy good for everyone in your party no matter what. That way, you're covered if someone gets sick during your journey, a natural disaster ruins your itinerary, or some other unforeseen event thwarts your plans.

What about primary and secondary auto rental coverage?

Mettler says rental car insurance is actually one of the most valuable types of coverage credit cards offer. But you'll need to check whether your card offers primary or secondary auto rental coverage, and when this coverage is applicable.

Primary auto rental insurance is particularly valuable because it will cover you without getting your personal auto insurance company involved, which could cause your personal insurance rates to go up. Secondary coverage means your personal auto insurance will pay first, and the credit card auto insurance will cover anything that is left.

If you're traveling outside the U.S., chances are your personal auto policy won't apply. In that case, even secondary rental insurance offered by your credit card becomes your primary insurance. For it to be valid, you'll need to pay for the car with your credit card and decline all optional coverage offered by the rental car company.

But before you do that, check for exclusions in your credit card's coverage. For instance, many issuers refuse to cover rentals in Israel, Ireland, Jamaica, Northern Ireland, Italy, Australia, and New Zealand.

Other exclusions are common, too. Arghandewal notes that even some premium cards won't cover luxury vehicles, rentals exceeding 15 days, or car rentals in certain international markets. "So if you're taking a cross-country road trip or traveling to Israel, you might want to take the sales rep up on the offer to buy additional rental coverage. The odds are, your credit card will not include it," she says (See also: 3 Things You Should Know About Rental Car Insurance)

While the collision damage waiver offered by rental car companies can be expensive, it may be worth it to have peace of mind.

How to know if you're covered

Travel blogger Lee Huffman of BaldThoughts.com says the key to protecting yourself is educating yourself on the types of coverage you have already and the types you can buy. From there, you can make sure you're covered sufficiently for every trip you take.

"As with any insurance policy, there are exclusions to coverage, so be sure to read through the details to make sure you are covered like you think you are," says Huffman. "Don't be afraid to call the credit card company or travel insurance agency to get your questions answered."

If you're on the fence about buying separate travel insurance or relying on your card, travel expert Howie Rappaport from AwardWallet.com suggests three simple steps. First, contact your card issuer to see what your card does and doesn't cover. Second, figure out what your own insurance policies might cover in terms of auto liability and health care. Third, do the math and assess your risk tolerance.

"It is all about the numbers and peace of mind," says Rappaport. "There is no right answer here, but hopefully, you've figured out what makes sense after talking with everyone."

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