Is Travel Insurance Providing Relief?

On March 11, 2020 many families were gearing up for Spring break and Summer travel as the World Health Organization declared COVID-19 a global pandemic. Three weeks later, the U.S State Department issued a Level 4: Do Not Travel advisory. Unfortunately, while COVID-19 is impacting travel on a global scale, many travelers were surprised to learn a pandemic is not listed as a “covered event” under many travel insurance policies and have been met with resistance and frustration when seeking to rebook or recover their expenses.

Travel insurance seems to be an area where people either have strong feelings in favor or oppose it’s use, but few people fully understand the policy when making the decision to purchase.  Our Financial Concierge team has been digging into the fine print of some of these policies to be a resource for our clients.  Travel Insurance is typically offered as an optional add-on when booking flights or hotels, but shopping and comparing policies from third party providers may yield superior coverage. Our goal is to provide useful information for navigating changes to pre-pandemic plans, as well as highlight considerations when booking post-pandemic travel.

Questions to consider:

• Do I already have adequate travel insurance coverage?
• What is most important to me? Flexibility? Cost? Recovery of expenses?
• Is the supplier of the insurance policy a credible company with a record of paying out benefits?

Travel Insurance Options

Purchase Directly Through a Third-Party Insurer

The world’s very first insurance agency for travel was opened in April 1864 by James Batterson. It was called The Traveler’s Insurance Company and the goal of the company was to provide coverage against theft and accidents while traveling. It has since evolved into a competitive industry with many different providers to choose from.

The cost of travel insurance varies based on specific travel expenses. According to InsureMyTrip.com, the cost for insurance travel premiums usually ranges from 4-10% of your total pre-paid, nonrefundable trip cost. If you make a claim, your insurance premiums are typically not included in the recoverable amount. When comparing pricing, it’s important the insurer has a record of successfully paying out claims. While it may seem obvious to choose the cheapest provider when comparing policies, taking advantage of savings may not be worth the risk if the provider has sub-par reviews. Consider comparison websites, such as www.travelinsurance.com or www.comsumeradvocate.org, to compare policies and insurers.

According to IBIS World, the Travel Insurance industry exhibits a low level of market share concentration, with the leading provider being American International Group Inc. (AIG) through its Travel Guard brand. For example purposes, we’ve chosen to reference the “Preferred” policy through Travel Guard, a popular policy sold by AIG. A full policy document can be found at www.travelguard.com

Insurance policies tend to be complex and heavy on jargon.  Here are some key points and recommendations based on the fine print we’ve discovered while researching the “Preferred” policy:

• Bring the contact information for your insurance agent and/or the 24-hour emergency hotline with you on your trip. Travel Guard requires notice in case of an event occurs triggering benefit coverage. In some cases, Travel Guard requires notification so they can arrange services, or they won’t cover the cost.
• If you decide against insurance coverage after purchasing it, you may cancel the insurance by giving the company or the agent written notice within the first to occur of the following: (a) 15 days from the Effective Date of your insurance; or (b) your scheduled Departure Date.
• “The Insured must notify the Travel Supplier within 72 hours or as soon as reasonably possible in the event of a Trip Cancellation or Interruption claim”. If you are not able to provide notice, you must have proof of the circumstance that prevented the timely notification.
• The Trip Cancellation guidelines consist of 26 covered reasons for cancelation and documentation must be provided. This policy does not contain a “Cancel for Any Reason” provision unless it is purchased separately.  .
• If the add-on “Cancel for Any Reason” coverage is purchased, the benefit does not pay out 100% of your trip costs and the cost of the insurance premium paid is excluded.  Even with “Cancel for Any Reason” coverage, your total out of pocket expense may be more than 25-50% of your covered trip costs. For example, if you pay $10,000 for insurance coverage and your premium is $1,000, your total out of pocket expense is $11,000. With “Cancel for Any Reason”, you can expect to recover between $5,000-$7,500 of the total $11,000 paid.
• Medical coverage under a travel insurance policy is limited and is not a substitute for major medical coverage. The “Preferred” policy, and most medical travel insurance policies, will provide a list of covered medical expenses and the terms of a pre-existing medical condition waiver.
• If emergency evacuation is necessary during your travels, you are required to prove the evacuation was ordered by an onsite physician and/or was authorized in advance by Travel Guard. If not authorized in advance, Travel Guard must be notified as soon as reasonably possible. This requirement is quite subjective; however, if the guidelines are deemed to not have been met by AIG, the benefit payout may be limited.
• If points or rewards are used to pay for your travel expenses, keep in mind that Travel Guard, and most insurers, will not reimburse travel points or other non-monetary redeemable points. Point reimbursement requests must be made directly with the program provider.

While policy documents lay out the coverage requirements of the policy, additional benefits may also be offered. Some examples are medical referrals, assistance coordinators, concierge services, and security services. Reading the full offerings of any policy may help you identify additional services you may find beneficial during your travels.

Credit Card Benefits

If your travel expenses are below $10,000, a credit card with an annual fee may provide travel insurance coverage comparable to what is offered by third party insurers. However, medical coverage is often limited through credit card coverage.

While credit card offerings change frequently, examples of travel cards offering travel insurance benefits include the Chase Sapphire Reserve Card, Bank of America Premium Rewards Card, American Express Platinum Card, and the United Club Card. Each of these cards offer different levels of travel insurance coverage and could be sufficient for your insurance needs. The annual credit card fee is generally less than $600 per year and includes travel insurance and other benefits, such as travel reward points, private lounge access at airports, and drink and food vouchers. We recommend careful comparison of benefits to your needs and usage.

Credit card provided coverage is generally secondary to any other applicable insurance, meaning you will need to submit claims through your other insurers before the credit card benefits apply. Pre-existing medical conditions are typically not covered and additional medical coverage may be advisable. Consider pairing benefits offered through your credit card provider with a medical only travel insurance policy to keep costs low. Most large travel insurance providers offer a low cost medical only policy and some even offer annual policy coverage for a flat fee. AIG, for example, offers an Annual Travel Plan that includes emergency evacuation coverage for less than $250 a year. Full policy details can be found at https://www.travelguard.com/travel-insurance/plans/annual.

How Can GHPIA and our Financial Concierge Team Help?

Our Financial Concierge team is available to review policy documents and credit card coverage to help you determine the appropriate solution for your travel plans.

For those who are eligible, our Professional Services Reimbursement Allowance (PSRA) program list of reimbursable expenses includes credit card annual fees. What does this mean for you? If you are considering or currently use a credit card with an annual fee, GHPIA will reimburse the annual fee up to your specific allowance. Please visit https://ghpia.com/our-fee-structure/ to determine your eligibility.

Each policy is unique to the insurer and travel plans. Whether you are submitting a claim or planning for your next adventure, our Financial Concierge team is here to address any questions that may arise.

The GHP Investment Advisors Financial Concierge Newsletter is published as a service to our clients and other interested parties. This material is not intended to be relied upon as a forecast, research, investment, accounting, legal or tax advice and is not a recommendation offer or solicitation to buy or sell any securities or to adopt any investment strategy. The views and strategies described may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only. Past performance is no guarantee of future results.

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