Consider the odds when buying travel insurance

By Wayne Wirtanen
This item appears on page 37 of the August 1994 issue.

Some kind of trip insurance is pur­chased by a large percentage of over­seas travelers, especially the over- age-55 set. The article “Overseas Travel In­surance — Magnifying the Fine Print” (April ’94, pg. 34) provided assistance in deciding how (or whether not) to select a policy. How­ever, what are the odds that you’ll actually need to collect on a travel-insurance policy?Trip-cancellation oddsIn my research for the above-men­tioned travel-insurance report, I was told by a representative of Travel Guard International that approxi­mately 3% of purchasers of their trip- cancellation insurance actually cancel a trip (that is, about one out of every 33 trips). In many instances, depending on how close the trip is to leaving, the loss (and the insurance pryout) due to cancellation may be only the amount of the deposit or cancellation fee, rather than the full cost of the trip. Full trip-cancellation coverage costs from 5.5% to 8% of the total trip cost, even if you’re not likely to lose the whole trip cost unless the cancel­lation is very near the departure date. If one assumes that average total dollar loss (and payout) to those 3% who actually cancel is approximately 33% to 50% of actual total tour cost, then the monetary equivalent drops to one full cancellation payout for each 66 to 99 trips. At 8% of a tour’s cost, an insurance company is charging the equivalent of one full loss in only 12 trips. (At the most common cost of 5.5%, it’s the equivalent of one full loss in 18 trips.)Overseas hospitalization oddsA couple of recent travel-related articles provided some interesting statistics that, when combined, pro­vide some idea of the likelihood that a traveler will be hospitalized on an overseas trip. In one article, a survey by the U.S. Travel and Tourism Agency was quoted as determining that “16 mil­ lion adult Americans flew overseas in 1992.” A second article quoted the State Department as reporting, “Each year, roughly 23,000 Americans are hospi­talized abroad.” I divided 23,000 by 16 million and came up with the number .0014375. This indicates that the odds of an American traveler being hospitalized on a trip overseas is about IV2 in 1.000. (A spokesman from Travel Guard confirmed the number by say­ing that their figures showed about one hospitalization per thousand trips.) Let’s assume that the odds of a traveler who is over the age of, say, 50 is two or three times as likely to be hospitalized as the average traveler. Then the likelihood of his or her being hospitalized on an overseas trip is still in the ballpark of only once in every 300 or so trips.“To buy or not to buy” (apologies to Wm. S.)Trip-cancellation coverage can pro­vide a good deal of peace of mind, particularly if the trip is an expen­sive one. Those 3% who collect some­thing on a trip-cancellation claim certainly feel that their decision to purchase coverage was a wise one. The relatively modest cost of pur­chasing travel health insurance makes sense if one is not sure of one’s existing coverage or hasn’t the time before a trip to find out. “You pays your money and you takes your choice.” Make sure that it’s a well-informed choice. • • •Constance nonvisuallyConstance on Lake Constance offers city tours for the blind and visually handicapped. The program includes visits to the cathedral, the state archaeological museum and the island Mainau, as well as individual programs. A group tour of about two hours costs from 120 marks (near US$72). For info, contact Tourist-Infor­mation, Postfach 102152, D-78462 Konstanz, Germany; phone 07531- 284380, or fax 284363.