What is Travel Insurance & How Does It Work?

Last Updated: February 14, 2019April 3, 2026 — 7 min read

What is Travel Insurance & How Does It Work?

Key Takeaways

Travel insurance is a type of insurance policy that provides reimbursement if your trip is disrupted by an unforeseen event.
Comprehensive travel insurance is the most popular type of policy, providing the most robust protection against cancellations, medical emergencies, delays, baggage loss, and more.
Annual travel insurance covers any number of trips taken within a 12-month period and can be a cost-effective option for frequent travelers
While travel insurance is usually optional, some destinations and tour operators require proof of travel insurance coverage.
We recommend comparing travel insurance plans from multiple providers to get the best policy at the lowest price.

Whether you’re traveling across the country or around the world, every trip comes with some level of risk. Even minor disruptions can quickly turn into costly setbacks.

For example, you might come down with the flu just days before departure and have to cancel your trip. Or your flight could be delayed overnight due to mechanical issues, leaving you to cover unexpected hotel and meal expenses. In truth, any unforeseen travel event can have negative financial consequences.

Travel insurance is designed to give you peace of mind before and during your trip by protecting you financially if things don’t go as planned. Follow along as we dive into the details so you can purchase your coverage with confidence.

What is Travel Insurance?

In short, travel insurance is a type of insurance policy that protects you against financial losses and unforeseen events that occur before or during a trip. Common examples include cancellations, medical emergencies, flight delays, and lost belongings.

Coverage typically works on a reimbursement basis, just as it does with most forms on insurance. This means that if a covered event results in out-of-pocket costs, such as an overseas hospital bill, you can file a claim with your provider to be reimbursed.

Travel insurance is more common than you might think. According to a 2025 survey from Upgraded Points, roughly 60% of Americans have purchased travel insurance at some point in their lives. As travel becomes more expensive and unpredictable, the need for reliable trip protection continues to grow.

What Does Travel Insurance Cover?

Travel insurance coverage varies by plan and provider, but generally includes the protection against the following events:

Trip Cancellations

Based on data from the past 12 months, the average trip insured through Squaremouth includes over $7,000 in prepaid, non-refundable trip costs. This means that having Trip Cancellation protection in place can save you thousands if you’re forced to cancel.

Medical Emergencies

Emergency Medical coverage can reimburse you for hospital stays, doctor visits, prescription medications, and other unexpected medical expenses incurred throughout your trip.

According to a recent Squaremouth survey, suffering a medical emergency during a trip is the most common concern among travel insurance customers. Since U.S. health insurance is not accepted abroad, getting adequate treatment can be a stressful and costly endeavor.

Important Note: Most travel insurance providers can also assist you in finding the best local care at your destination and arranging upfront payment on your behalf if required for treatment.

Emergency Evacuations

An evacuation is one of the most costly emergencies you can face while traveling. These services, usually carried out by trained professionals, ensure you are safely transported during life-threatening situations.

Travel insurance generally offers two types of evacuation protection:

Medical Evacuation: If you suffer a severe injury or illness, medical personnel can airlift or transport you to the nearest facility capable of providing adequate care.
Non-Medical Evacuation: If your destination experiences a natural disaster, terrorist attack, or civil unrest, this coverage helps transport you to a safe location.

As noted by the CDC, emergency evacuations can cost more than $100,000 per person. Without coverage in place, this expense would fall entirely on you, potentially creating a significant financial burden during an already stressful situation.

Significant Delays

Flight delays occur fairly frequently. A recent report from the U.S. Department of Transportation revealed that around 1 in 5 flights are delayed at least 15 minutes. While short delays can be relatively harmless, longer disruptions can result in meal and hotel purchases as you wait for your new departure time.

Travel insurance can help cover these costs if your trip is delayed due to weather, mechanical issues, or other covered reasons. Trip Delay protection often extends beyond flights, including delays for cruises, trains, and buses, giving you peace of mind no matter how you travel.

Lost, Damaged, or Stolen Items

Imagine strolling down Barcelona’s iconic La Rambla and stopping to buy a souvenir, only to discover your wallet has been stolen from your bag.

While this is just one example, pickpocketing, bag snatching, and other petty crimes are common risks for travelers abroad. Travel insurance includes Baggage Loss protection, which can reimburse you for items that are lost, stolen, or damaged during your trip, helping to minimize the financial impact of these unexpected events.

The 3 Best Types of Travel Insurance

There are four main types of travel insurance available online, each serving a unique purpose:

Comprehensive Coverage: The most popular kind of travel insurance, providing broad protection for trip cancellations, medical emergencies, travel delays, and baggage loss. Ideal for international travelers with non-refundable trip costs.
Travel Medical Insurance: Focuses primarily on medical emergencies abroad, including hospital stays, doctor visits, and medical evacuation. Best for budget-friendly travelers concerned about healthcare costs while overseas.
Annual (Multi-Trip) Insurance: Covers multiple trips within a year under a single policy, often at a lower cost than purchasing separate policies for each trip. Great for frequent travelers.
Group Travel Insurance: Covers travel groups of 10 or more at a discounted rate.

This is a high-level overview of the main types of travel insurance you may encounter. For a deeper dive, check out our full guide: “The Most Popular Types of Travel Insurance.”

What Are ‘Trip-Specific’ Travel Insurance Plans?

Certain trips carry unique risks that standard coverage may not fully cover. Trip-specific travel insurance plans are designed for these getaways, offering benefits and coverage limits tailored to the particular type of vacation.

Providers create these specialized policies to ensure their customers are fully protected while away from home. Here are some examples of trip-specific plans available on Squaremouth:

Cruise Travel Insurance: Include cruise-specific benefits like Missed Cruise Departure coverage and high Medical Evacuation protection in the event you need to be airlifted at sea.
Flight Insurance: Provide strong coverage limits and low minimum delay periods for flight-related benefits like Trip Delay, Missed Connection, and Baggage Delay.
Family Travel Insurance: Offers complimentary coverage for children under the age of 18, providing substantial travel insurance savings for large families.
Adventure & Sports Travel Insurance: Covers high-risk adventure sports and activities that are commonly excluded from standard trip protection.

When is Travel Insurance Required?

Travel insurance is generally only mandatory if your destination or tour operator requires it. While this is rare, failing to provide proof of coverage can result in denied entry, inability to board a tour, or financial penalties, making it important to confirm requirements before traveling.

For example, all major Antarctica cruise lines require passengers to have travel insurance with high Medical Evacuation coverage before boarding. Similarly, all Schengen countries mandate travel medical insurance for visitors who require a visa.

More often than not, though, travel insurance is optional but strongly recommended to protect against unexpected medical emergencies, trip cancellations, or lost belongings.

5 Tips for Finding the Best Travel Insurance Plan

Determine Your Coverage Needs

Take a moment to review your itinerary and consider any destination-specific travel risks. This can help you get a better feel for the type of travel insurance plan you need, the benefits to prioritize, and the reimbursement rates to look for.

For example, safari trips often require high Medical Evacuation coverage due to travel in remote national parks, while a trip to India may call for higher Emergency Medical coverage to account for unexpected illness.

Check for Existing Travel Protection

You may already have trip protection without realizing it. Many travel credit cards offer benefits such as Trip Cancellation and Trip Delay to assist cardholders while traveling.

However, this coverage rarely includes medical protection, so it should be used as supplemental coverage alongside a dedicated travel insurance plan.

Compare Options From Multiple Providers

Travel insurance coverage and premiums can vary dramatically from one provider to the next. It’s not uncommon to see almost identical plans offered by different providers at two completely different prices. Comparing your options is the only way to know you’re getting the best plan at the lowest cost.

Using a comparison site, like Squaremouth, can save you a lot of time and stress when going about this process. We suggest getting quotes from at least three different providers. Due to the uncertainty of travel, consider plans that include optional benefits such as Cancel For Any Reason (CFAR) and Interruption For Any Reason (IFAR).

Review Lists of Popular Policies

Not all travel insurance providers are household names. Unless you frequently purchase trip protection, many of the companies and plan names you encounter are likely completely new to you.

To help, we’ve created a handful of lists that include some of the top-selling travel insurance policies for various categories:

Pay Attention to Policy Coverage Limits & Exclusions

Every travel insurance plan comes with coverage limits and exclusions that define what is, and what isn’t, covered. Before purchasing a policy, carefully review these details to avoid surprises if you need to file a claim.

For example, some plans limit coverage for high-risk activities like scuba diving or skiing, while others exclude pre-existing medical conditions unless certain eligibility requirements are met. Understanding these limits and exclusions ensures you select a plan that truly meets your needs and provides the protection you expect.

Checklist When Reviewing Travel Insurance Policies

Whether you’re purchasing travel insurance for the first time or the 1,000th time, a little checklist doesn’t hurt. When reviewing policies from different providers, make sure the following items are covered:

Your itinerary: Make sure all activities you plan to pursue during your trip are eligible for travel insurance coverage
Your health: Since U.S. health insurance is not accepted overseas, we recommend at least $50,000 in Emergency Medical coverage when traveling abroad
Your destination: Some destinations are excluded from coverage due to conflict or terrorism threats
Your travel expenses: If you’re getting comprehensive coverage, ensure the Trip Cancellation coverage covers all of your upfront costs
Your trip length: Some single-trip travel insurance plans cap trips at 30 days, which may not work if you’re taking an extended vacation
Your baggage: If you’re traveling with valuable items, make sure your plan includes strong Baggage Loss protection

Keep in mind, when you start a quote on Squaremouth, we will only show you policies that match your trip details, eliminating a lot of the guesswork. Visit our complete guide on buying travel insurance on Squaremouth for more information.