Last month I went to Japan for a few weeks to do research for a book.
My plan was to start in Osaka, spend a few days on the southern island of Kyushu, then fly up north to chilly Hokkaido before finishing up in Tokyo.
Not everything went as planned.
I made it as far as Kyushu before coming down with Norovirus, also known as viral gastroenteritis. The less said about the symptoms of this disease the better.
Let’s just say I was out of commission for a week. I had to cancel two flights and an Airbnb reservation.
With the exception of a small slice of the Airbnb fee, these were nonrefundable, so I was out about $450 on travel expenses. I also racked up $160 in medical bills
While lying in bed hating life, I had plenty of time to reflect, and one of the many questions I asked myself (along with “WHY???”) was: Should I have bought travel insurance?
On the road again
Travel insurance is complicated. Policies generally cover many types of travel trouble, ranging from lost luggage and delayed flights to political instability and medical evacuation.
World Nomads, a popular travel insurance provider, lists 11 categories of coverage on its basic policy.
In addition, some travel policies carry deductibles. Most charge extra if you’re planning “adventure sports” or traveling in single-engine planes.
And all charge more or exclude travelers above a certain age—World Nomads policies, for example, are only for travelers under 67.
The easiest way to compare policies is at InsureMyTrip.com. I priced out a 4-week trip to Japan and got quotes ranging from $7.25 to $578.
The cheap plan isn’t really travel insurance: it’s a negligible amount of life insurance.
The most expensive is a gold-plated Cadillac plan that pays out 75% of your trip cost if you cancel your trip for any reason, plus a host of other benefits.
What to insure?
These catch-all insurance policies that cover lost luggage, trip delays, rental cars, stolen cameras, and changes of heart sound convenient.
But they have a big problem: it’s a waste of money to insure things you can easily pay for yourself.
Let me explain what I mean.
I priced out a World Nomads policy.
World Nomads coverage is excellent: they don’t charge deductibles (except on car rental collision coverage), their premiums are reasonable, and they have a reputation for paying claims promptly.
I could have bought a policy from them for $100, and it would have covered all of my losses in full. Assuming my claim was accepted, they would have cut me a check for $610.
Obviously, I should have bought the insurance.
The problem with that reasoning is that of course it makes sense to buy insurance if you know in advance when you’re going to need it.
In fact, if we look at the big picture, the case for buying insurance is a lot less compelling.
First, I’m submitting my medical bills to my health insurer at home, and I expect they’ll be reimbursed (minus the usual copay and cost sharing).
In terms of health care, it probably didn’t cost me any more to get sick in Japan than it would have back home.
If you have Medicare, Medicaid, or another policy that doesn’t cover you abroad, that’s a good reason to buy travel insurance (or a supplemental medical plan).
The rest of the iceberg is all the trips I took where I didn’t get sick.
Footloose and insurance-free
I love to travel. In the last two years I’ve taken three trips to Asia and four domestic trips, including one national tour with many nonrefundable flights.
The total cost of insuring those trips would have been over $400.
And why stop there? Since 2000, I’ve taken dozens of trips, and this is the first time I can remember having an insurable loss.
And most of the stuff covered by travel insurance is the kind of common, small-potatoes losses you’re better off covering out of pocket: stolen electronics (most travel policies put a severe limit on this category), lost luggage, canceled flights.
But there’s a big exception.
Get me outta here
It would be easy to take this line of reasoning too far. Why buy any insurance at all?
If I didn’t buy fire insurance for the last twenty years and my house didn’t burn down yet, I win!
Insurance makes the most financial sense when you use it to protect against unlikely but catastrophic losses.
Extended warranties are a ripoff. Auto liability insurance is so smart it’s the law.
There is one catastrophic risk unique to travel: medical evacuation (medevac).
My sister-in-law in a nurse in a trauma hospital, and she regularly sees patients who got sick or injured on vacation and can’t figure out how to get home from Seattle.
They need a medical escort or air ambulance, but they can’t afford it, and their insurance doesn’t cover it.
And if you think flying around the world is expensive now, imagine bringing along doctors, nurses, and life support equipment. It could run into six figures, easy.
Nearly all travel insurance covers medical evacuation (often excluding preexisting conditions).
But you can also buy this kind of insurance separately, without all the value meal add-ons like trip cancellation and lost luggage.
Like term life insurance for health people, you’d expect medevac insurance to be cheap. And you’d be right.
I found a one-month policy through InsureMyTrip for $26. It covers international but not domestic travel.
My health insurance covers 80% of the cost of medical evacuation. Since that last 20% could easily drain my emergency fund, however, I’ll buy a medevac policy next time I leave the country.
I hope I never need to use it. There are worse seats than coach.
Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.