Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.
An entity which provides insurance is known as an insurer, insurance company, or insurance carrier. A person or entity who buys insurance is known as an insured or policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and must involve something in which the insured has aninsurable interest established by ownership, possession, or preexisting relationship. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated. The amount of money charged by the insurer to the insured for the coverage set forth in the insurance policy is called the premium. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster.
Travel insurance is insurance that is intended to cover medical expenses, trip cancellation, lost luggage, flight accident and other losses incurred while traveling, either internationally or within one’s own country.
Travel insurance can usually be arranged at the time of the booking of a trip to cover exactly the duration of that trip, or a “multi-trip” policy can cover an unlimited number of trips within a set time frame. Some policies offer lower and higher medical-expense options; the higher ones are chiefly for countries that have extremely high medical costs, such as the USA.
The most common risks that are covered by travel insurance plans are:
- Medical emergency
- Cancellation, curtailment and trip interruption
- This section covers any unused travel and or accommodation costs, pre-paid charges (including any additional travel expenses incurred, provided they are deemed reasonable and necessary) if a trip is canceled or cut short under a variety of circumstances, which may include any of the following, depending on the policy:
- death, bodily injury, illness, disease, or pregnancy complications
- compulsory quarantine
- jury service
- being called as a witness
- termination of employment (provided you did not know about it before you booked the holiday)
- being called up if you are a member of the armed forces or other public defense or safety organization
- prohibition of travel by the government to the intended destination
- officially recommended evacuation from the intended destination
- official advisory against going to or remaining at the intended destination
- Repatriation of remains
- Return of a minor
- Trip cancellation
- Trip interruption
- Visitor health insurance
- Accidental death, injury or disablement benefit
- Overseas funeral expenses
- Lost, stolen or damaged baggage, personal effects or travel documents
- Delayed baggage (and emergency replacement of essential items)
- Flight connection was missed due to airline schedule
- Travel delays due to weather
Medical expense coverage can be per-occurrence or maximum-limit.
Some travel policies will also provide cover for additional costs, although these vary widely between providers.
In addition, often separate insurance can be purchased for specific costs such as:
- Pre-existing conditions (e.g. asthma, diabetes)
- Sports with an element of risk (e.g. skiing, scuba diving)
- Travel to high risk countries (e.g. due to war, natural disasters or acts of terrorism)
- Additional AD&D coverage
- 3rd party supplier insolvency (e.g. the hotel or airline to which you made non-refundable pre-payments has gone into administration)
- Acute onset of pre-existing conditions
- Pre-existing medical conditions
- Elective surgery or treatment
- Terrorism – Most trip cancellation policies include terrorism but only when there is an act of terrorism that meets the policy’s criteria including definition, place of occurrence and date of occurrence.
- Injury or illness caused by alcohol or drug use
Travel insurance can also provide helpful services, often 24 hours a day, 7 days a week that can include concierge services and emergency travel assistance. Pre-existing medical conditions must be declared prior to the trip start date. In case you ignore this requirement and fall ill during your trip abroad, you may find that you are not covered.The European Health Insurance Card (EHIC) entitles to treatment in state-run hospitals in EU countries and Iceland, Norway, Liechtenstein and Switzerland but it is not a substitute for travel insurance