Planning to Travel in Retirement? 3 Pros and 3 Cons of Travel Insurance.

Key Points

• A travel insurance policy may be more expensive than you expect.

• Most U.S. health insurance policies don't provide coverage when you're out of the country.

• Ultimately, only you can decide if travel insurance would provide you with peace of mind.

• The $23,760 Social Security bonus most retirees completely overlook ›

You're finally going to do it -- travel across Europe visiting all the sites you've always wanted to see. You've spent years planning and saving for the trip. However, by the time your first flight touches down in Portugal, you're already having second thoughts.

After schlepping to the airport at 4 a.m., you learn that your flight has been delayed by six hours. You finally board, and less than two hours into the flight, you start to feel a dull ache around your stomach. You don't know if it's food poisoning, your peptic ulcer acting up, or appendicitis, but you know you need medical help.

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The potential for a situation like this inspires tourists to purchase travel insurance. However, travel insurance may not be right for everyone.

Image source: Getty Images.

What is travel insurance?

Travel insurance is designed to cover various risks that can arise while visiting other countries. Policies vary widely in coverage, but standard features include financial protection in the event of trip cancellations and travel disruptions, medical emergencies, and lost luggage.

Here are the pros and cons of travel insurance so you can decide whether to include it in your travel plans.

Pros

These are the three best reasons to consider travel insurance.

1. Coverage for medical expenses

No matter how comprehensive your policy is, health insurance doesn't always follow you. You may find in-network coverage if you're traveling across the U.S., but most policies -- including Medicare and Medicaid -- don't cover healthcare in other countries. For that, you generally need to buy travel medical insurance.

Depending on the terms of the policy, you may have $50,000 to $2 million in medical coverage. You can also purchase medical evacuation coverage with policies covering up to $500,000. Unless included with your medical coverage, you may also want to look for a policy that offers emergency dental expenses.

2. Protection against losses

While it's possible to have a health emergency while traveling, issues like lost bags are more common. Travel insurance can protect you against trip cancellation, trip interruption, trip delays, missed connections, loss of baggage and personal effects, baggage delays, and even sporting equipment delays.

Whether you're collecting Social Security or working and collecting Social Security, your money is hard-earned. Travel insurance protects against losing money due to no fault of your own.

3. Availability of concierge services

Some comprehensive travel insurance policies include a concierge service. This service is available around the clock and can help with issues like replacing a lost passport or finding a physician in a medical emergency.

A concierge service may offer a weather forecast, suggest activities, make hotel and restaurant reservations, and help you land tickets to an event or excursion.

Cons

Here are three reasons you might want to think twice before laying out the funds for travel insurance.

1. Cost

The average cost for travel insurance is 4% to 8% of your total trip cost. For example, if the cost of your trip is $6,000, you can expect to pay between $240 and $480 for coverage, depending on the company and level of coverage purchased.

It's important to weigh the cost of coverage against what you might spend if you break a bone or need evacuation from an emergency. Your only move in that situation may be to dip into your emergency fund to return home.

2. There are exclusions

Here are some situations and issues standard travel insurance won't typically cover:

• Pre-existing conditions: Generally, this includes any illnesses or injuries you experience within six months of purchasing the insurance.
• Change of plans: Travel insurance won't cover the cost if you cancel your trip for personal reasons.
• Epidemics and pandemics: Global health events aren't covered.
• Predicted natural disasters: If your policy is purchased after experts predict a natural disaster, you won't be reimbursed for losses due to that disaster.
• Booking mistakes: If your travel provider makes an error, insurance won't cover it.
• Excluded items in luggage: If your luggage is lost, your policy may exclude items like glasses or hearing aids.
• War and civil unrest: If war or civil unrest breaks out and you're in trouble, travel insurance won't cover it.
• Pregnancy-related expenses: Travel insurance doesn't cover non-emergency pregnancy expenses, including regular labor and delivery.

3. You may pay for something you never use

Managing your personal finances is all about deciding what's ultimately in your best interest. While there's an excellent chance you'll never use it, only you can decide if working travel insurance into your budget will allow you to rest easier, knowing the coverage is there.

Travel insurance aims to make you more confident in your travels. Your only job is to decide if it's worth the cost.

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