Is Travel Insurance a Smart Bet for Your Vacation?

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Hurricane Irene's swath through the Caribbean this week probably left many of the no-longer paradise-bound wondering: Should I have taken out travel insurance?

Gabe Saglie, senior editor for the deal publishing site Travelzoo, doesn't often buy travel insurance, but this time of year makes him think twice, he told DailyFinance.

Protection against weather-driven cancellations and delays emerges as a prominent option because it's the peak of hurricane season. Cheap getaway packages in at-risk areas tend to pop up for sale. Tropical resorts want your business during slow periods. But no matter how attractive the discount, keep in mind that a storm could eat up large, nonrefundable portions of your travel budget. It doesn't take a once-in-a-decade event like Irene to destroy your plans and take your money.

"Hopefully you never need it, but travel insurance is a cushion that could offset thousands of dollars [in losses]," Saglie said.

Of the 40 to 50 trips he took in the last year, he estimated that he purchased coverage three or four times -- all for flights from Los Angeles to the East Coast in winter. As soon as spring arrived, insurance was "no longer on my radar," he told DailyFinance.

Travel insurance is basically a bet without a bookie. Companies offer attractive odds so you bite on a policy. For instance, when I punched in hypothetical numbers this week at the aggregator Insuremytrip.com, a New York City couple in their mid to late 40s traveling to Puerto Rico from Sept. 2-9 would have to pay $172 to cover the cost of a $2,000 jet-and-hotel package.

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In other words, the company would be paying you better than 10 to 1 in the event you didn't take the trip for reasons specified in your policy. Of course, vendors offer those odds because chances are, your trip won't be cancelled or you won't qualify for compensation for other reasons stated by the carrier.

Saglie traveled to the Caribbean in June, the start of hurricane season. He didn't buy insurance. But if he were planning that same trip for September, he said he would have considered it. A few days after this interview, he was scheduled to go to Maui. Faced with a $150 tab for insurance, he didn't take it because the weather on the island tends to be stable at this time of year. "I took the gamble," he said.

Whether to buy coverage comes down to perceived value. Saglie went with his gut and experience on offering guidelines. Honeymoons or other once-in-a-lifetime voyages that cost, say, $3500 or more, definitely merit coverage. Cruises in which you have to fly to the embarkation port can be insured, especially if the connection window is small and weather might be a factor. (Cruise companies are notorious for their strict refund rules.) Those planning a vacation far in advance ought to consider a policy as well, because a lot can happen in a year.

Among the reputable policy carriers that Saglie recommended were Travel Guard and Access America. But read the fine print, Saglie warned. Carriers get persnickety about weather-related payouts, not to mention policies that also cover terrorism, illness, baggage, and rescue for high-adrenaline vacations such as mountain-climbing.

Whatever the policy, it's a good idea to choose a company that is not related to the airline or trip packager, advised Andrew Young, Travelzoo's website editor. You can also decrease the chances you'll need insurance at this time of year by picking one of the ABC islands -- Aruba, Bonaire and Curacao, which tend not to be hit by hurricanes, he said.

Smartmoney.com suggests securing insurance just after booking, with the exception of cruises. And to avoid duplicate coverage, double-check with your credit card company to find out what it already indemnifies.

Then, the decision is yours. Nature will take its course.

Said Young: "It's about weighing your capacity for risk."
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