What Does It Cover and Is It Worth It?

There are many unexpected situations before or during a trip where travel insurance can be a lifesaver.

“Travel insurance is often an overlooked investment until the unforeseen happens,” says Beth Godlin, president of Aon Affinity Travel Practice. “It’s designed to give travelers peace of mind and financial protection against travel risks.”

Find out what travel insurance covers, how much it costs and if it’s the right choice for you.

Travel insurance generally covers your expenses, your belongings and your well-being. When shopping for a policy, look for these benefits:

Trip cancellation

If your trip is canceled for a covered reason — including illness or injury, the death of a family member, job loss, deployment and even unplanned jury duty — trip cancellation coverage will reimburse airline tickets, hotel rooms, rental cars, tours, cruises and other prepaid, nonrefundable expenses.

Cancellations can also be covered if a natural disaster, severe weather or airline strike prevents your carrier from getting you to your destination for at least 24 hours.

Trip delay 

Trip delay coverage pays for food, lodging and local transportation if a delay is due to severe weather, airline maintenance or civil unrest.

“For a traveler to be eligible, they must be delayed for the minimum amount of time listed on their policy,” said Squaremouth spokesperson Megan Moncrief. “Some policies are very lenient and provide benefits for any length delay, while others list a length requirement, usually somewhere between 3 to 12 hours.”

Daily payout limits range from $150 to $250 per traveler, according to Moncrief, while the total policy limit can be anywhere from $500 to $2,000. Save any receipts to submit with your reimbursement claim.

Trip interruption

Should you need to cut your trip short due to illness or injury — or if there’s a family emergency back home — your policy may reimburse non-refundable expenses you forfeited.

It may also cover the cost of a one-way economy airline ticket home.

Baggage delay

Your policy should cover toiletries, clothes and other essential items you need to buy if your bags are delayed for a certain amount of time. The benefit is usually capped at a specified dollar amount, either by day or total.

Baggage loss

Airlines are required to compensate passengers for luggage lost in transit, but a travel insurance policy may have a higher benefit limit. It could also cover you if your bags, passport or other possessions are lost, damaged or stolen once you’ve gotten to your destination.

Not every loss is covered, though: Cash is not reimbursable and many policies won’t reimburse for expensive jewelry. Read your policy carefully to see what is included.

Medical expenses and emergency evacuation

If you’re traveling abroad, your health insurance likely isn’t valid. Travel insurance should cover doctors’ fees and hospital bills, Durazo said, and the provider can help coordinate care and ensure you’re at a medical facility that is up to U.S. standards.

An emergency medical evacuation can cost anywhere from $15,000 to over $200,000, Durazo added.

If bought early enough (usually within 14-21 days of booking) a Cancel For Any Reason policy allows you to call off your plans for any reason — including any of the above. However, you must typically cancel at least 48 hours before departure. CFAR plans typically only reimburse 50% to 75% of your expenses, according to Allianz’s Daniel Durazo, and can bump up the cost by about 40%.

• Plans with higher limits and more optional coverage cost more.
• A plan with a CFAR benefit can cost up to 40% more.
• Older travelers typically pay more because there’s more of a likelihood of a claim being filed. 

There are many options in the travel insurance market: Aggregator site SquareMouth lets you get price quotes from dozens of carriers. Because it receives a commission from the insurance companies on its site, there’s no markup or extra fees.

At CNBC Select, we work with experts with specialized knowledge and authority. For this story, we interviewed Beth Godlin, president of Aon, which provides custom travel insurance for tour operators, cruise lines, travel websites and others. We also spoke with former Squaremouth Megan Moncrief and Allianz communications director Daniel Durazo.

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