Travel insurance protects you against Murphy's Law: what can go wrong, will go wrong. Holidays cost a lot, and sometimes life throws you a curve - so for 5 to 10 percent of the cost of the vacation, buying travel insurance is a small price to pay for financial security. For example, a one-week vacation to Disney World for a family of four probably costs at least $4,000. If something happens that prevents you from going on the vacation and you don't have insurance, you've potentially lost a large amount of money. If you're covered, it only sets you back $200 to $400, a loss most of us can live with.
Travel insurance covers two main concerns: trip cancellation or interruption and medical expenses while on vacation. Let's say you're out of the country enjoying a little rest and relaxation in Bermuda and you become seriously ill - travel insurance covers the medical expenses beyond those not covered by your health insurance, that are necessary to nurse you back to health before heading home. Those costs can be staggering. As for trip cancellation, if something occurs that leaves you with no alternative but to cancel your trip entirely or postpone your plans indefinitely, it's comforting to know you won't suffer financially.
Experts suggest, if you are planning a trip well in advance, it makes sense to buy travel insurance. The reason: the longer period means a greater likelihood of something happening that requires cancellation. However, if you are traveling within the United States and are cancelling the trip more than a few days from departure, most hotels will allow you to cancel without penalty. The same might not hold true for exotic destinations.
It seems that everyone has an opinion about travel insurance - some say you should buy it for peace of mind no matter the situation, others feel it's only necessary for travel to remote parts of the world. Still more feel that it's necessary when spending a large amount of money on a once-in-a-lifetime trip. It's probably one of the most misunderstood forms of insurance around.
Do your homework, and if you decide travel insurance makes sense, buy it from someone other than your travel agent or vacation packager. This way, if any related travel company goes out of business, your insurance will still be valid.