Travel Insurance

Travel insurance is a distinct line of insurance covering the risks a traveler takes on by committing money and time to a trip. NAIC's Travel Insurance Model Act, adopted by the NAIC in 2018 for states to enact with variations, defines it in section 3N as "insurance coverage for personal risks incident to planned travel, including: (1) Interruption or cancellation of trip or event; (2) Loss of baggage or personal effects; (3) Damages to accommodations or rental vehicles; (4) Sickness, accident, disability or death occurring during travel; (5) Emergency evacuation; (6) Repatriation of remains; or (7) Any other contractual obligations to indemnify or pay a specified amount to the traveler upon determinable contingencies related to travel as approved by the Commissioner." The same definition excludes major medical plans providing comprehensive medical protection for travelers on trips lasting longer than six months, which is the boundary between a travel policy and expatriate health coverage.

The thing being sold usually has a different name from the thing being defined, and the difference is the most useful fact on this page. The model act separately defines a "travel protection plan" as a plan providing one or more of three things: travel insurance, travel assistance services, and cancellation fee waivers. Only the first is regulated as insurance.

Travel assistance services are defined as "non-insurance services for which the consumer is not indemnified based on a fortuitous event, and where providing the service does not result in transfer or shifting of risk that would constitute the business of insurance". The act lists what they include, and the list is genuinely useful because it is the part travelers most often assume is coverage: security advisories, destination information, vaccination and immunization information, travel reservation services, translation assistance, emergency messaging, international legal and medical referrals, medical case monitoring, coordination of transportation arrangements, emergency cash transfer assistance, medical prescription replacement assistance, passport and travel document replacement assistance, and concierge services. The act closes the definition with the plainest possible sentence: "Travel Assistance Services are not insurance and not related to insurance." A plan that arranges an air ambulance is doing something different from a policy that pays for one.

A cancellation fee waiver is defined as "a contractual agreement between a supplier of travel services and its customer to waive some or all of the non-refundable cancellation fee provisions of the supplier's underlying travel contract", with or without regard to the reason for canceling or the form of reimbursement, and the definition ends: "A Cancellation Fee Waiver is not insurance." It is a promise from the tour operator or cruise line about its own cancellation terms, and it typically returns a credit rather than money. Someone who bought one and expected a medical policy has bought a real thing that does a different job.

The unfair trade practice provisions are where the act has teeth. Offering or selling a travel insurance policy "that could never result in payment of any claims for any insured under the policy" is an unfair trade practice, which is the rule aimed at coverage a particular buyer is structurally ineligible to claim under. Marketing blanket travel insurance as free is separately named as an unfair trade practice. Sales materials must be consistent with the policy itself, including its forms, endorsements, rate filings and certificates. And where a policy carries a preexisting condition exclusion, the act requires that information and an opportunity to learn more about it be provided before purchase and again in the fulfillment materials.

Two disclosure rules answer the questions buyers actually have. The company must disclose, in the policy documentation and the fulfillment materials, whether the travel insurance is primary or secondary to other applicable coverage. And the plan may be canceled for a full refund of the travel protection plan price, from purchase until at least 15 days after the fulfillment materials are delivered by postal mail, or 10 days after delivery by any other means, unless the insured has started a covered trip or filed a claim.

How it reaches the buyer. Travel insurance is commonly sold by businesses that are not insurance agencies. The act creates a limited lines travel insurance producer license and allows a "travel retailer", meaning a business entity that makes, arranges or offers planned travel, to offer and disseminate travel insurance under that producer's business-entity license, subject to conditions including giving purchasers a description of the material terms, the claim process, and the review or cancellation process. A separate provision prohibits offering or negotiating travel insurance "by using negative option or opt out, which would require a consumer to take an affirmative action to deselect coverage, such as unchecking a box on an electronic form", when the consumer buys a trip.

These are provisions of a model act. States adopt models with variations and on their own timetables, so what governs any particular sale is that state's law and the plan documents themselves. The Insurance guide covers when this coverage is worth buying, which is a separate question from what it legally is.

The traveler buys a plan, usually at or near booking, and receives fulfillment materials confirming the purchase and setting out the coverage and assistance details. The cancellation window then runs from delivery of those materials. If a covered event occurs, the traveler claims under the insurance component, supported by documentation, and the insurer pays according to the policy's limits and its primary or secondary position. Assistance services are used by calling the plan's service line and are not a claim at all, because nothing is being indemnified.

A hypothetical example of what "primary or secondary" changes. A traveler runs up a $9,000 hospital bill abroad. Under a plan whose medical benefit is secondary, the traveler's own health plan pays first: suppose it pays $6,300, and the travel policy then covers the remaining $2,700 less its $250 deductible, or $2,450, leaving the traveler $250 out of pocket. Under a plan whose medical benefit is primary, the travel policy pays $9,000 less the $250 deductible, or $8,750, up front, and the health plan is dealt with afterwards or not at all. The traveler is $250 out of pocket either way. What differs is who fronts the money, how many claims have to be filed, and how long the reimbursement takes, which is why the model act makes the disclosure mandatory rather than optional.

Three checks are worth making before buying. Which of the three components is actually in the plan, since a plan may contain any combination of them. Whether the medical benefit is primary or secondary. And whether the plan is being added by default at checkout, which the model act prohibits in states that have adopted it.

Pros

• It covers a defined and enumerated set of travel risks, including emergency evacuation and repatriation, which household health coverage frequently does not.
• Assistance services genuinely help in an emergency abroad, including medical referrals, case monitoring and document replacement.
• The model act creates a free-look window of at least 15 days after mailed fulfillment materials, or 10 days otherwise, for a full refund.
• Illusory coverage, which could never pay any claim, is an unfair trade practice rather than merely poor value.
• Whether the medical benefit is primary or secondary must be disclosed.

Cons

• The product sold as a "travel protection plan" can be up to three legally different things, and only one of them is insurance.
• Travel assistance services arrange help without paying for it, which is the difference travelers most often discover at the worst moment.
• A cancellation fee waiver is the supplier's own promise and commonly returns a credit rather than cash.
• Preexisting condition exclusions are common, and the disclosure obligation is about explaining them rather than removing them.
• The cancellation right ends once a covered trip has started or a claim is filed.