There are a few things to consider when determining which portion of travel expenses to insure on a travel insurance policy.
First of all, when travel insurance providers refer to the cost of a trip, they are usually referring to the prepaid, non-refundable travel arrangements that were purchased prior to departure. A good way to think of trip cost is to consider the amount of money a traveler would lose if they had to cancel a trip.
Many travelers choose to insure 100% of these expenses because it sets the limit for trip cancellation benefits. If they cancel for a covered reason on the policy, they will be reimbursed their full trip cost.
Additionally, some benefits require travelers to insure 100% of these prepaid, non-refundable expenses. These benefits may include:
- Cancel for Any Reason
- Pre-existing Conditions
- Financial Default
- Cancel for Work Reasons
However, many travelers have expenses they pay for prior to departure that are fully refundable if they cancel. It is not necessary to insure refundable expenses.
Keep in mind that the amount insured for trip cancellation also directly affects the amount of trip interruption coverage available. The lower the trip cost, the less trip interruption coverage a traveler will have in their travel insurance policy.
Understanding the definition of trip cost and considering which benefits are affected by it will help travelers select the right coverage.