Travel insurance is often unnecessary, and undoubtedly one of the worst things to get insured for, and wisely makes it to the list of the worst investments overall.
The average cost of travel insurance for a $5,000 trip is $228, with rates ranging from $154 for a basic policy to $437 for a policy with extensive coverage.
The first thing that pops up into your mind as an average Joe traveler may be, “Wait a second. If I am spending $5,000 anyways, why not spend 200 more bucks?”
But this is where averages fail. Travel insurance is not a standalone term; it is a concept. Those “Travel insurances” add up to be pretty darn expensive. This is why I only purchase what I need. And again “I”, here is not the author. “I” is the rich mindset.
There are many ways to spend your money and the number of possibilities are endless.
But here are some suggestions on what not to do with your money:
1) Don’t buy travel insurance if you really can’t afford to pay for the trip at all if anything happens. Unless you have a balance in your bank that you can comfortably spend, don’t buy it as an investment in a form of security.
2) Don’t buy travel insurance for a particularly low-cost trip with an alternative way of covering yourself financially – such as losing your job or something like that – if things go wrong on the trip or if something happens to someone in the family who won’t be able to work while they’re away on holiday.
Things that make you believe you need travel insurance
Countries including Argentina, Chile, Philippines and Iran have a mandatory requirement for travel insurance. If it is mandatory, you can do nothing about it but accept it as the truth.
But people from other countries like the UK, for example, get carried away with insurance. And hence, they get unnecessary insurances like travel insurance. And there is also a myriad of stories where people have saved thousands, by buying travel insurance.
SOME OF THEM ARE LISTED BELOW: –
1) A $1,200 policy paid $3,000 to replace 14 computers after a hotel housekeeper stole them from a guest.
2) In 2010, in Iceland an insurance policy of $1,600 was paid off as the volcanic ash cloud reached Britain. This resulted in the airline refunding $300 per ticket to rebook and travel on later dates.
3) In 2015 a British woman was stunned when her $1,500 policy paid for the entirety of her trip to Istanbul after two men printed counterfeit tickets and boarding passes on her computer and used them on an entirely different flight.
4) A horror story in Monaco in 2010 where a young girl’s travel insurance policy which cost $7,000 was billed back as medical expenses for a speeding ticket resulting from attempting to catch up with her friends, after she fell over on cobblestones.
Such examples are catchy, attractive, and sound like a safer way to travel, plus the feeling of peace.
The above-mentioned claims are too good to be true. No, it’s not that the insurance company is not going to pay you. It’s just that insurers always win.
In general, people are not aware of the tricks and factors that affect travel insurance policies. The underlying aspects here are – what exactly is covered and what is not covered. The important thing to know is – how does it work?
Is an insurer’s win always your loss?
Not applicable for all. Most people are happy that they are buying ‘peace of mind’ for money. Travel insurance, in particular, is unnecessary because the insurer has the best edge here. Our insurance policy covers us in case of an accident, illness or death. If a person with a high-priced travel insurance gets caught in such an unfortunate situation where the insurance exceeds the actual coverage cost, then who will take care of them? The insurer would.
Once you get insured for any policy, you might feel that it is always a winner for you.
TRAVEL INSURANCE IS AN INSURER’S WIN BECAUSE:
1) Travel insurance covers you for eligible accidents and illnesses. Insurance companies know how to balance the risks and make sure that they don’t take too many claims from a passenger.
2) The insurance amount is not so high compared to the cost of the trip. But they are toxic additions to your spending list that attract other expenses, especially insurances.
3) Insurance companies ask for your medical information. They know they’ll have to spend a bit based on the type of trip, but they also know that you’re likely to spend more than they will.
4) Uninsured losses are factored into the average cost of travel insurance. In the long run, people end up paying far more for their policies than what they paid out in claims and other losses.
5) Premiums differ based on details like age, family members traveling and where you’re headed. This is how insurers get to charge extra for certain destinations. For example, if you’re a young rider, a claim in Mexico City might not be worth as much to your insurer as one in a city closer to home.
It all depends on your overall net worth and the costs of your travel. If a $5000 trip is an expensive one for you, you would be eager to get travel-insured. That’s fine. But if I were you, I would save a few pennies for months, to buy that $200 insurance. It’s just not something as simple as $5000+$200.
TRAVEL INSURANCE OR TRIP CANCELLATION INSURANCE? WHAT’S THE DIFFERENCE?
With trip cancellation insurance, you are covered for both trip cancellation and trip disturbances. But for the purpose of this article, both are the same.
What to do with your money instead of travel insurance?
Instead of unnecessary travel insurance, use those $200 to buy books on how the economy works. Or better still, invest in a travel startup that you can use to fund your travels.
This will give you a better perspective on how much is really necessary for a trip and you can plan accordingly. What’s more, the benefits from investments will be way better than from insurance policies.
But this article is not about investing or startups; it’s only about what one should do with their money rather than spending money on travel insurances. It’s always better to go back to the basics of what they are doing while traveling instead of spending a lot on insurance.
When you gamble, you are told ‘gamble only what you can afford to lose’. The general rule of thumb in insurance, which very few people know, is ‘pay only what you are willing to lose’. If you are paying for unnecessary insurances, you are losing your money.
So, instead of spending your money on travel insurance, you can invest it, for example, in a travel startup that is cheaper than travel insurance. This would allow you to travel on less expensive trips. You can also use your money for other business-related travel expenses, like travelling for sales calls (very important), or buying more expensive cameras.
Ultimately, your money should be used in a way that would benefit you without putting too much of it at risk, like on a travel startup. If you feel hesitant about taking more risks and not having strong enough information about the economy, then stick with an insurer; otherwise, try traveling as cheaply as possible by using these tips!