There are many types of insurance for the world traveler and choosing the right plan can be confusing. Becoming familiar with the basic types of plans and the specialized terms will make it easier to compare plans, and ultimately choose the right plan for your needs.
Often people think travel insurance means flight accident insurance, i.e., the kind of insurance that pays the insured or its beneficiary a lump sum when an airplane accident results in death or serious injury. Flight accident insurance plans are commonly found at airports and they pay substantial sums to accident victims and their families.
However, there are two other primary types of travel insurance that are designed to reduce the financial risk posed by unforeseen medical expenses and other crises that can confront international travelers. Although the distinctions can be blurred between the two types of plans, they are generally categorized separately as international medical insurance and travel protection plans, both of which may be offered in single-trip, multi-trip, or renewable versions.
International Medical Insurance is short or long term medical insurance designed to reimburse you for medical expenses incurred when you are traveling or living in a foreign country. Maximum policy coverage levels can be substantial enough to cover major medical expenses such as emergency surgery and extended hospital stays. The "American-style" of international medical insurance coverage is subject to the specified deductible and co-insurance or co-pay. Plans may include emergency evacuation, reunion, and repatriation benefits as well as other travel assistance services.
Travel Protection Plans typically reimburse your non-reimbursed travel expenses if an emergency (death, sickness, airline strike, travel company bankruptcy, etc.) occurs right before or during your trip causing it to be canceled, interrupted or delayed. Often these plans include travel assistance services, protection for lost or damaged baggage, as well as limited coverage for incurred medical expenses. In many cases there is no deductible or co-pay for covered medical expenses.
Travel Assistance services may be bundled into an international medical insurance or travel protection plan, but these services are not considered insurance. The term travel assistance covers a broad range of services, often including but not limited to: toll-free multi-lingual 24-hour emergency telephone numbers, local offices around the world, web sites offering aid and advice to travelers in need of travel, medical or legal help, translation services, passport and visa assistance, assistance filling prescriptions, and virtually any special assistance useful to travelers in crisis who are far from home.
Some credit cards and international student identification cards and associations offer complimentary travel assistance benefits to their cardholders and members. However, keep in mind that although travel assistance services can provide instant help with a free phone call when needed most, not all services are free of charge once rendered. Many specific travel assistance services, such as legal counsel or translation services, are provided without question at the time of need, but with the clear understanding that the traveler will subsequently reimburse that service provider at a later date when the traveler is in a more convenient position to pay for the service(s) rendered.
Maximum Policy Coverage is the maximum amount of money that the insurance provider will pay for covered expenses. This may be an overall maximum or an amount for each accident or illness.
Deductible (also known as excess in UK, NZ, AU) is the amount that the insured must pay before the insurance provider starts paying. This may be an annual amount, an amount for the duration of the policy, or an amount for each incident.
Co-Insurance or Co-pay is the percentage or amount of expenses that the insured pays (if any) after the deductible is paid. Example: "Co-Insurance = 20% or co-pay is 80/20" means that the insurance company pays 80% of the charges, the insured pays 20%. Often there is a maximum co-pay amount, i.e., a limit or ceiling above which the insurance provider pays 100%. Example: "Deductible = $250 and 80/20 co-pay up to $5000, then 100% up to policy maximum." This means the insured is required to pay the deductible of $250 plus 20% of expenses up to $5,000, and the insurance provider pays 100% of covered expenses that exceed $5000 up to the maximum policy coverage limit. Thus, if total expenses exceed $5000 (e.g. $20,000 in total medical expenses) then the insured pays $250 (deductible) plus the co-pay maximum of $1000 (20% of the first $5000) for a total out of pocket cost to the insured of $1250, and the insurer pays the remaining $18,750 of expenses. Where total expenses are only $3000, then the insured pays $250 (deductible) plus $600 co-pay (20% of $3000) for a total out of pocket cost of $850, and the insurer pays the remaining $2150 of expenses.