Eye on Travel Insurance — Consider the odds

Consider the odds when deciding whether or not to purchase travel insurance

Not much help from the travel insurance people
This has not been an easy article to write. Travel insurance is a complex topic. And, as usual, I submitted an early version of the article to someone in the travel insurance business to review the text for clumsy mistakes.

Prior to 9/11, eight to 10 percent of traveling Americans bought travel insurance. Since then, purchases have grown to 30%. Americans spent one billion dollars on travel insurance in 2004. Member companies of the U.S. Travel Insurance Association (UStiA) account for an estimated 90% of the U.S. travel insurance market.

I thought that a member of the UStiA would be a good source for article review and critique. The gentleman I submitted the article to saw it as being very anti-travel insurance. He criticized my choice of numbers as outdated and incorrect. He was not prepared to provide more accurate, up-to-date numbers, however.

I understand that the travel insurance industry has some proprietary business statistics that they do not like to share. And if I were selling travel insurance, I wouldn’t be thrilled to have someone point out that there may be times when the purchase of travel insurance wouldn’t be particularly necessary or cost effective.

Some numbers were provided to me for my 1994 article by a representative of a major travel insurance company. Although my continued use of those dated numbers now was criticized, I was given no suggestion that they are currently much out of the ballpark. (And no one from the travel insurance industry challenged the numbers back in 1994.)

One man’s insurance philosophy
My philosophy regarding purchasing insurance of any kind is to only purchase protection against losses that are catastrophic, that is, ones that I cannot easily absorb. It is not cost effective to insure against relatively minor/modest losses.

My home is insured against fire and other major disasters; my vehicles are insured against liability claims that might occur due to a driving accident, and health insurance protects against potential catastrophic medical bills. Whenever a significant premium reduction is available for a higher deductible, however, I choose the higher deductible because, if I have a claim, the deductible amount is one that I can absorb without great financial pain.
This is why I feel that a simple cost/benefit evaluation is appropriate when considering the purchase of a travel insurance package. Under normal conditions, travelers who are affluent enough to travel overseas should consider whether even the complete loss of the price of a trip (which, statistically, is relatively remote) is really financially catastrophic.

Consumer Reports newsletter opinion
The January 1999 issue of the Consumer Reports Travel Letter had a segment entitled “Travel Duds for 1999 — Don’t Fall for the Traps,” which made a statement similar to my philosophy regarding insurance.

Their recommendation was as follows: “What price peace of mind? That’s the dilemma in deciding whether to buy trip-cancellation or -interruption insurance (TCI) to cover losses if you can’t begin or complete a trip as planned. While it protects you against losing prepayments and deposits, it’s grossly overpriced.

“We recommend it only to cover losses you can’t afford to absorb. If you can afford to forfeit a modest deposit or advance payment, don’t buy it at all. But give it a look if you want to guard against full or partial loss of payments you’ve made for a major package tour or cruise.”

Trip cancellation odds
What are the statistics that might indicate the odds that you’ll actually need to be reimbursed for a major financial loss in a lifetime of travel and insurance purchases?

In my previous research on the topic, I was told by a major travel insurance provider’s representative that only 3% of the purchasers of their travel insurance packages actually canceled a trip (that is, it happened about once out of every 33 trips).

Full travel insurance packages generally cost about four to eight percent of a trip’s cost, even if you’re not likely to lose (and be reimbursed for) the whole trip cost unless the cancellation is very near the departure date. Trip cancellation/interruption (TCI) coverage is responsible for the largest fraction of the cost of a complete travel insurance package.

However, one situation in which it would be particularly logical for you to purchase travel insurance is if you or a close family member is in fragile but stable health. Most travel packages allow for reimbursement if you or a close family member’s sudden health decline causes cancellation of your trip.

In this case, you must get a waiver of the preexisting-condition clause or be able to prove that the health condition was stable and required no unroutine doctor visits and that there were no medicine dosage changes. If you have this concern, check this detail out closely with whomever sells you a travel insurance package. Travel agents and other sources of purchase get a commission of up to 35% of the cost of the policy — make them earn it.

Overseas hospitalization odds
Travel insurance packages offer additional features, of course. What about financial protection for overseas medical expenses?

My 1994 research indicated that, statistically, the number of times American travelers likely would be hospitalized on overseas trips was approximately 1½ per thousand trips. A spokesman for a major travel insurance company confirmed that, saying that their records indicated one hospitalization per thousand trips.

Additional confirmation of that low frequency came from a 2004 conversation with the cruise director of a Russian ship. She told me that in her years of experience, there were about one or two hospitalizations per thousand (senior) travelers. They were mainly brief hospital stays for x-rays, etc., for an occasional fall-related joint dislocation or broken bone that the ship’s doctor was unable to treat appropriately.

Many travelers already have health insurance that covers overseas medical expenses, even if bills must be paid overseas and then presented to their home health insurance company for reimbursement. (Reminder — in those cases, documentation of overseas costs must be presented to your insurance company in English.) And I can’t remind seniors often enough that Medicare does not cover overseas medical expenses.

Those travelers who have had positive experiences with travel insurance help or loss reimbursement are walking salespeople for those products.

Emergency medical experiences while cruising
In response to my recent requests in ITN for examples of medical emergency experiences while cruising, five readers responded.

Christel Robbins of New Orleans was on a shore excursion during a Vantage Deluxe World Travel cruise-tour in 2004 when, in London, she developed a serious shortness of breath. After seeing a cardiologist and being urged to return home immediately, she elected to return home as scheduled on the Queen Mary 2, where, luckily, she needed no further medical attention.

Her medical expenses in London came to about $700, and her Blue Cross/Blue Shield policy reimbursed her 85% of that. She related that when she asked Trip Mate to reimburse the balance of the bill, “The travel insurance company (as best as I can remember) said that they were not responsible for any payment since my medical insurance paid the greatest part of my expenses.”

Most travel packages provide only “secondary coverage”; that is, they pay only what your principal insurer does not. In Christel’s case, the medical portion of her trip insurance package was not necessary because her overseas medical expenses were covered by Blue Cross/Blue Shield.

Christel added, “. . . upon my return home. . . after several months of tests, I had open-heart surgery to replace my severely defective heart valve with a porcine one.”

Mrs. John Putman of Sun City, California, was scheduled for a Norwegian Cruise Line Panama Canal trip after she had been treated for pancreatitis. From John Putman’s e-mail — “They misdiagnosed the illness as being caused by diverticulitis and put her on the wrong diet. She seemed all right, and the doctor did not forbid us going ahead with the cruise, so we did. The first day out, after ‘pigging out’ at the buffet table she was in excruciating pain.”

John continued, “I took her to the infirmary, where she fell in love. Dr. Verdoorn, a Dutchman from South Africa, was young, tall, blond and handsome. He admitted her and kept her on IV for seven hours. He advised that she was having a gall bladder attack and was on the wrong diet and put her on another strict, no-fat, no-caffeine diet. She was great after that and enjoyed the rest of the cruise immensely, except for having to sit opposite me at the dinner table watching me consume all those luscious desserts.

“The total charge for this service was an unbelievable $115! We couldn’t have been more pleased and sent a letter to NCL thanking them and the doctor. My wife had her gall bladder out after returning home and has never had a problem with the pancreas since.”

Regarding travel insurance, John Putman said, “We did not have insurance for that trip, but ever since we have. Not just because of that trip but because of the other problems we are having as we get longer in the tooth.”

Ellen Moss of Marina del Rey, California, wrote, “On Feb. 8, 2006, while on Orient Lines’ Marco Polo sailing to Antarctica and the Falkland Islands, I fell at our first landfall in Antarctica. I can’t remember falling, but when I woke up someone told me the doctor was coming ashore to see me and that I shouldn’t move until he arrived. I had fallen flat on my face and was bleeding from my nose and forehead.

“When the doctor arrived along with a nurse, they immediately helped me to return to the ship, but not before removing the seasick patch I had been wearing. The doctor said that he had had many incidences of falls, disorientation and even psychotic episodes from passengers wearing the patch.”

Ellen continued, “I was taken to the ship’s operating room, where I received 12 stitches in my forehead and antibiotics to prevent infection. I was kept there for several hours and was also x-rayed for breaks. I saw the doctor every day for the remainder of the cruise and was treated with concern and compassion, since this was my first trip alone since my husband had died last year.

“I cannot say enough kind things about the quality of care and the staff, and I was never even asked to pay a bill. I had bought travel insurance before I left, and for a time I thought I might need the evacuation service; fortunately, I was able to complete the trip.”

Clarence Garzoli of Forestville, California, wrote, “My wife and I were on a cruise to the Black Sea in June 2005 aboard Costa Cruises’ SS Costa Romantica. On the third day out, my wife started itching and scratching, thinking that she might have been bitten by something while on a shore excursion on Capri or Santorini or that it could have been something in our stateroom.

“The room stewardess sprayed the room on several occasions, but the itching and redness only intensified. Finally, after being offered a cabin change, another stewardess suggested that we visit the ship’s doctor. Without hesitation, he decided that it was an allergic reaction to ‘something’ and prescribed medications and a topical ointment. Within hours, the itching stopped and we were able to enjoy the remainder of the trip.

“The medical staff on board was professional, courteous and very helpful. In addition, although the cost was nominal, our HMO reimbursed us for the expense!”

Had Clarence purchased travel insurance? He answered, “Yes, at my age I do so every time!”

Estelle Unger of Colorado Springs, Colorado (who had no at-home health insurance for overseas medical emergencies), wrote, “On Sept. 7, 2004, while on Norwegian Coastal Voyage’s Nord­norge in rough seas, I was thrown face down onto the deck and was temporarily unconscious. Seemingly okay except for bumps and bruises, I subsequently had two seizures on Thursday, Sept. 9.

“I was hospitalized at our next stop, Sandnessjoen, Norway. After a couple more seizures in the hospital, I was given an EEG, a CAT scan and numerous tests. The local doctor had teleconferences with a neurosurgeon at a larger hospital in another city. I had received a concussion but had no intercranial bleeding.

“Our cruise director was in constant touch with our trip insurance company, Trip Mate. By Saturday, I was able to join the group for the remainder of the tour. Trip Mate was great. They paid for my husband’s stay in a hotel, his meals, all of our hospital and medical costs, the flight from Sandnessjoen to Bergen, taxi fares — in short, everything (including a prorated share of the days of the voyage that we missed). I’ve had no further problems.”

Bottom line
The above information might make one with a “bean-counter” mentality consider that there are times when the purchase of travel insurance is not particularly necessary or cost effective.

There are many others who would decide, “Never mind! If there’s an opportunity to buy peace of mind, financial protection and travel assistance, then I’m all for it.”

I say, “You pays your money and you takes your choice.” Just make your choice be an informed one.

Minimum recommendation

My minimum recommendation for an overseas trip is to make sure you have the following:

a) some kind of overseas health/accident expense coverage. If your at-home medical policy does not cover overseas medical expenses and you don’t necessarily want trip-cancellation coverage, you can purchase stand-alone overseas medical expense coverage.

For example, Travelex (800/228-9792, www.travelex-insurance.com) sells a “light,” “zero dollar” travel insurance policy that deletes trip-cancellation/interruption coverage but provides $50,000 in medical expenses plus medical-evacuation service, coverage for baggage loss, etc., for two 65-year-olds for a trip of up to 30 days for $71 — an attractive package price! Call travel insurance broker Dan Drennan (866/979-6753, ext. 3621, or 402/343-3621) for details of this and similar plans.

b) an emergency medical evacuation/repatriation service policy from any one of a large number of providers (such as the one offered by Divers Alert Network [800/446-2671, www.diversalert network.org] at $44 for a family for one year. Check out their website for details of their many services.)

There are relatively unknown additional sources of evacuation coverage, such as Northern California’s “AAA Plus” upgrade. Check on whether this service is provided by your local auto club or any of the other associations or dues-paying affiliations of which you are a member.

A few premium credit cards offer coverage in which they will pay for needed medical evacuation services, but be aware that when most credit cards offer simply “assistance in arranging for” evacuation, the cardholder is actually liable for the entire cost of evacuation. Review the details of the services provided by your own credit card to determine whether the credit card company or you will pay for the cost of evacuation.

c) twice as much cash as you expect to need (in money belts or equivalent) and

d) two credit cards with high amounts of funds available for emergency use.

Happy trails!

Eye on Travel Insurance is written by Wayne Wirtanen.