Personal Finance King

A Personal Finance Money Blog from a Christian Perspective

  • Home
  • About
  • Contact
  • Recommended Sites
You are here: Home / Travel & Finance / To Buy or Not to Buy – Analyzing the Need for Travel Insurance

To Buy or Not to Buy – Analyzing the Need for Travel Insurance

September 12, 2017 by Barnaby

A recent post on my mom’s service trip to India on which she broke her hip raised a few questions among readers about travel insurance. Is it worth the expense, or is it like the extended warranty offered on an electric screwdriver at checkout – an extra expense that pads the retailer’s bottom line.

As with most things, it depends. Weigh these 3 things:

  • Size of the potential loss
  • Probability of loss
  • Your comfort level with the risk of loss

The 1st and 2nd bullet are the stuff of green-shade-wearing actuaries. But forget about them and do these calculations for yourself:

  1. (Big potential loss) X (Big probability of loss) = Yes insurance
  2. (Small potential loss) X (Small probability of loss) = No insurance
  3. (Big potential loss) X (Small probability of loss) = ???
  4. (Small potential loss) X (Big probability of loss) = ???

#1 Scenario: (Big potential) X (Big probability)

You are going to a cousin’s destination wedding in Tahiti with your father, who just had triple bypass surgery and is newly-fitted with a pacemaker. His doctor has asked him to stay home, but your father wouldn’t miss these nuptials for anything.

Unless he has to. This scenario is tailor-made for travel insurance, because the trip is expensive and the probability of having to cancel is not small. A no-brainer.

#2 Scenario: (Small potential) X (Small probability)

You are going to a cousin’s ‘destination’ wedding … in Poughkeepsie, NY. You are going by yourself on a Greyhound bus.

If anyone proposes insurance for this trip, there is only one appropriate response: You laugh uncontrollably in their face. Even in the unlikely scenario that your cuz gets cold feet and skips town, you aren’t out enough cash to cry over. Save your tears for when she comes looking for a shoulder to cry on.

#3 Scenario: (Big potential) X (Small probability)

Whitewater rafting in Alaska – definitely not the time to wonder whether you have insurance

A good example of this scenario is our recent guided vacation to Alaska. There wasn’t a credible reason to believe that the trip might be canceled or interrupted (no expected extreme weather, or shaky-health participants), but since it was a ‘deluxe’ escorted trip, the dollars committed were extreme (over $5,000 per person). So even though the chance of trip cancellation was slim, the size of the potential loss motivated us to secure travel insurance, for $601 for the two of us (kids were included free).

The insurance was through AIG and covered:

  • 100% of cost for trip cancellation prior to the scheduled departure date.
  • 150% of cost for trip interruption after departure: reimburses forfeited, non-refundable, unused payments or deposits
  • $750 for trip interruption – return air only
  • $750 for trip delay: up to $150 per day/per person for delays of more than 5 consecutive hours
  • $250 for a missed connection due to inclement weather or common carrier
  • $1,000 for baggage or personal effects that are lost, stolen or damaged
  • $300 for baggage delay of more than 12 hours
  • $25,000 for accident sickness medical expense including dental
  • $500,000 for emergency evacuation and repatriation of remains (very generous, but was really hoping to not need this one!)
  • $10,000 for accidental death & dismemberment (not so generous, but still hoping to not need this one!)

We never redeemed a cent of these benefits, but we were happy we didn’t have to.

#4 Scenario: (Small potential) X (Big probability)

You are renting a house in Key West…in September. The height of hurricane season. The trip doesn’t require a 2nd mortgage, but the chance of vacation interruption or cancellation is north of single digits.

What to do in this scenario (and for #3) depends on your tolerance for risk, and how it affects your sleep.

Personally, I have a good tolerance for this type of minor risk, so we don’t generally buy trip insurance under these circumstances, unless the loss potential is the size of Trump’s ego.

Rather, every time we don’t buy insurance, I play in my mind one of my favorite video clips, the one where I smugly deposit the cash I would’ve spent on insurance into my savings account. Probably not a GIF that will go viral, but it’s wildly popular in my head.

Mom’s India Experience

We haven’t been burned by this stinginess yet, but my mom’s experience in India has given me pause.

As part of her mission team, she, like everyone else in the group, was provided a 9-day policy – standard procedure for an official church trip.

No one gave it any thought until the crack heard ’round the world. Then suddenly the $50 policy was the best return on any investment ever.

It completely covered:

  • Pre-surgery tests and diagnostic X-rays
  • Hip replacement surgery
  • Intensive week-long hospital stay
  • Pre- and post-consultations with 3 doctors
  • Three weeks of post-op physical therapy
  • Transportation

Total out-of-pocket cost for Mom or the church? $0.

That’s not to say that it was all smooth sailing (or smooth cricketing as it were). Operating in a developing country like India, what you’re due and what you get sometimes differ.

I’ll let my mom take it from here:

There were a few tense moments. You see, everything had to be paid up front. Many thousands of dollars were advanced by the church and given to the hospital before they would even agree to take me as a patient. Then the insurance money was to be paid directly to the hospital and we were supposed to reimburse the church with what was refunded by the hospital to us.

But when the time came to discharge me, the hospital was very reluctant to give back that original advance. They told us they couldn’t do it then because there was a bank holiday, but they would take care of it later. I was convinced it would not work, so I sat back down on my bed and said politely that I wasn’t leaving until we had the money in hand. That was in the morning, and finally about 7 PM they gave us a check and we left.

There you have it direct from the lips of an experienced and wily 70-something mother, who realized one butt firmly planted in their non-revenue-generating hospital bed is more valuable than many butts comfortably resting in the U.S., trying to get an Indian hospital administrator on the phone.

But even the wiliest women can be beat, as also related by Mom:

Somehow in the excitement of getting me loaded into the car to leave the hospital, my metal walker got left behind. My Hindi-fluent missionary caregiver returned immediately for it, but it was too late. He had to buy me another one.

See me previous post on 7 Insurance Commandments for Thrifty People for more guidance on when to buy insurance, and how to use it.

Filed Under: Travel & Finance Tagged With: probability of loss, risk of loss, size of loss, travel insurance, trip cancellation insurance, trip delay insurance, trip interruption insurance

Comments

  1. Miguel (The Rich Miser) says

    September 12, 2017 at 1:25 pm

    You can also get some forms of travel insurance automatically if paying for the trip with some credit cards. For example, the Citi Prestige. The annual fee is around $450, but it can be well worth it for the benefits.

    • Barnaby says

      September 12, 2017 at 1:49 pm

      Good idea, just be sure to check disclaimers and limitations to be sure you are actually covered for everything you want.

  2. Valerie M says

    September 30, 2017 at 7:32 pm

    Your mother’s trip to India and unfortunate travail is so rich with life lessons. I most loved her realization of the hospital staff being God’s intended “minister to” recipients and not the orphanage children.

About Me

About Barnaby King Welcome to the Personal Finance King blog, which explores issues of Money, Faith, Work, and Family. I am Barnaby King. More
Subscribe to Receive New Posts by Email:

Check your inbox or spam folder now to confirm your subscription.

RSS RSS Feed

  • Quick Takes: Riding Greyhound, Winning Mega Millions & Human Composting
  • Know Your Value
  • My Tiny Bitcoin Investment Lost 64% of Its Value

Most Popular Posts

1. How Should We Respond to Needy People on the Street?
2. We Ported Our Landline Phone to Google Voice, Saving $46 Per Month
3. What Is the Role of Faith in Personal Finance?
4. 9 Life and Finance Lessons from “Alexander Hamilton” Biography by Ron Chernow
5. Top 8 Free and Offbeat Historic Things to Do in Baltimore
6. Why We Live in Baltimore Despite Its Problems
7. How a Prized Pocket Knife Was Imperiled on a Trip to See the Rockettes
8. Is 16 Too Old for a First Phone?

Categories

  • Earning Money
  • Faith & Finance
  • Kids & Finance
  • Love & Finance
  • Misc Finance
  • Politics & Finance
  • Saving Money
  • Travel & Finance
  • Uncategorized
  • Work & Finance

Archive

  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • August 2022
  • June 2022
  • April 2022
  • March 2022
  • January 2022
  • December 2021
  • October 2021
  • September 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016

Copyright © 2023 · Metro Pro on Genesis Framework · WordPress · Log in