Travel for Less: What do the Japan tsunami and the oil spill in the Gulf of Mexico have in common?

What do the Japan’s Tsunami and the oil spill in the Gulf of Mexico have in common? Both threw a monkey wrench into individual and group travel plans and sparked renewed interest in the benefits of travel insurance.

While we have already talked about problems going wrong with my United flight lets now expand this blog to discuss if there is a problem anywhere before or during the trip. Travelers with standard trip cancellation insurance policies who were stranded by the Japan tsunami were in luck because most travel insurance plans cover all nonrefundable, prepaid travel expenses for delays or cancellations due to acts of nature.

By contrast, the BP Deepwater Horizon oil spill is considered a man-made pollution event rather than a natural disaster and thus in contract lingo, is not a "covered peril." A standard travel-insurance plan typically does not cover cancellation for a man-made event but policyholders whose flight or cruise is delayed or canceled due to the oil slick may be covered under the travel-delay provisions of their policy. If the destination becomes uninhabitable, that is often a covered peril. But if the hotel is functioning but the beach doesn't look good, that doesn't mean that the hotel is uninhabitable.

Confused? Let's break it down. Travel insurance packages typically include coverage for the following: trip cancellation, travel delay, lost-delayed baggage, medical, dental, emergency evacuation, 24-hour traveler assistance and accidental death. Some policies include options for rental car collision and damage coverage.

The cost of travel insurance is generally 5 percent to 7 percent of the price of the trip. Thus, a $5,000 trip would cost roughly $250 to $350 to insure. You can purchase additional peace of mind with a cancel-for-any-reason policy. This upgrade, which typically adds 30 percent to the overall cost of a travel insurance policy, insures against a greater number of incidents, including, “I don't feel like going.” This type of policy is also good in those situations where there is a possibility you might need to cancel, such as your daughter is due to give birth around the time of your cruise.

Travel insurance not only protects you should illness strike or your tour operator closes down, its medical and 24-hour assistance/evacuation coverage can stave off a potentially catastrophic financial blow should you require emergency assistance aboard a cruise ship or in a foreign country. You should buy your policy within two weeks of prepaying for your trip because some pre-existing medical conditions are typically waived if you purchase within that time period.

How can you tell if you need travel insurance? That depends on your personal and financial situation and the nature of the trip. Is your health likely to force you to cancel or postpone your trip? How much would you pay out of pocket for food and lodging if your flight were delayed, and what is a likelihood of that happening given your destination, seasonal weather, etc.? Are you exploring Tahiti on your honeymoon or taking a leisurely Alaskan cruise with your parents? The rule of thumb would be to ask yourself: What do you stand to lose? I generally don’t buy travel insurance but when I took a trip to Tahiti last year with multiple flights and hotels, I figured something could go wrong with any one portion of the trip that had the potential to disrupt the rest of the trip. In that case I bought the insurance. I went to Insuremytrip which provided quotes from multiple travel insurance providers. Hopefully you will never have to use the policy but if you think you will, click on this link

I did not have travel insurance while on a whitewater rafting trip in Chile. At 2 AM we received a knock on the door telling us to evacuate as the hotel was on fire. I lost all my luggage but at least I am alive to write this blog. I lucked out as my homeowner's insurance reimbursed me when I got home.