How to find the best travel insurance

Traveling can be expensive, and you may think you'd be saving money by skipping the travel insurance. But the reality is, the more you spend on your trip, the more you have to lose if something goes wrong.

After all, everything from a lost bag to an injury abroad could add to your costs. And, that's where travel insurance can help.

Here's what it covers, how much it costs and how to tell if it's the right choice for you.

"Most travel insurance plans include some coverage for trip cancellation, trip interruption, trip delay, emergency medical expenses and lost luggage," Rhonda Sloan, senior vice president of sales and marketing at the travel insurance company Travel Guard, told CNBC Select by email.

Here's what each of these categories covers.

Trip cancellation

If your trip is canceled for a covered reason — including illness or injury, the death of a family member, job loss, deployment and even unplanned jury duty — trip cancellation coverage will reimburse airline tickets, hotel rooms, rental cars, tours, cruises and other prepaid, nonrefundable expenses.

Cancellations can also be covered if a natural disaster, severe weather or airline strike prevents your carrier from getting you to your destination for at least 24 hours.

Trip delay 

Trip delay coverage pays for food, lodging and local transportation if a delay is due to severe weather or airline maintenance. Usually, you need a delay of at least six hours to qualify.

If you find yourself in this scenario, save any receipts to submit with your reimbursement claim.

Trip interruption

Should you need to cut your trip short due to illness or injury — or if there's a family emergency back home — your policy may reimburse non-refundable expenses you forfeited.

It may also cover the cost of a one-way economy airline ticket home.

Baggage delay

Your policy should cover toiletries, clothes and other essential items you need to buy if your bags are delayed for a certain amount of time. The benefit is usually capped at a specified dollar amount, either by day or total.

Baggage loss

Airlines are required to compensate passengers for luggage lost in transit, but a travel insurance policy may have a higher benefit limit. It could also cover you if your bags, passport or other possessions are lost, damaged or stolen once you've gotten to your destination.

Not every loss is covered, though: Cash is not reimbursable and many policies won't reimburse for expensive jewelry. Read your policy carefully to see what is included.

Medical expenses and emergency evacuation

If you're traveling abroad, your health insurance likely isn't valid. Travel insurance should cover doctors' fees and hospital bills, and many policies can also help coordinate care and translation services, if necessary.

Each carrier has different exclusions, making it even more important to read the fine print and terms of plans you're considering.

However, there are some broad exclusions to be aware of before you buy. "Travel insurance plans generally do not cover losses caused by or resulting from things like acts of war, epidemics or pandemics, travel restrictions imposed by government authorities or foreseeable events," Sloan said.  

She added that popular activities in certain areas, like scuba diving and cliff diving, fall under the category of adventure sports and aren't covered. However, some brands offer the option to add coverage to your plan for these activities.

If purchased early enough, usually within 14 to 21 days of booking, a cancel for any reason policy allows you to call off your plans, including for the reasons listed above. However, you must typically cancel at least 48 hours before departure. CFAR plans typically reimburse only 50% to 75% of your expenses.

If your policy includes a waiver for pre-existing conditions, a chronic health condition may also be covered. You must buy coverage within 14 to 21 days of booking, insure 100% of your nonrefundable trip costs and be medically able to travel at the time of departure.

A travel insurance policy typically costs between 4% and 10% of the prepaid, nonrefundable expenses associated with your trip. The cost varies, however, by a few factors.

Age is one of them: Older travelers typically pay more while younger travelers pay less.

Plan options and add-ons also tend to change the cost. Plans with higher limits and more optional coverage tend to be more expensive. And, a plan with a cancel for any reason benefit tends to cost more: "CFAR would increase the cost of the travel insurance plan by an additional 2% to 4% of the total trip cost," Sloan said.

Whichever plan you select, read the fine print so you understand what you're paying for.

Many popular credit cards include travel insurance. Many offer trip cancellation and interruption protection, as well as travel medical insurance and coverage for rental car damage.

We've previously called out several credit cards for travel insurance, including the Chase Sapphire Preferred® Card (see rates and fees) and Capital One Venture X Rewards Credit Card. Here are some of our top cards for travel insurance:

See rates and fees for the Chase Sapphire Reserve® Credit Card.

But there are some caveats to relying on your card for travel protection. Most notably, you must book your trip with that specific card. In addition, coverage limits on cards are usually lower than with standalone policies, so read the terms and conditions.

It's rare for credit cards to cover adventure travel or cancellation due to acts of war. And, you won't be able to modify your coverage like you could with a standalone policy. So, things like coverage for pre-existing medical conditions and cancel for any reason coverage aren't available with credit card travel insurance.

As you start shopping for travel insurance, you'll find that not all policies are the same. The information presented on a travel insurance company's website should give you an understanding of what's covered, but there are things you should look for in the policy's documents to fully understand what you're buying.

Most travel insurance companies have sample policies available online to help you understand what you're buying. And policies typically have a free look period of 10 to 15 days, which allows you to review your policy and be sure it's a good fit, or get a refund.

There are a few things to look for as you compare options.

• High limits of medical coverage: When taking a cruise or heading to a remote location, you might want to prioritize high levels of medical coverage, as care can be more expensive in these locations or even require expensive transportation costs to get you to a place with adequate facilities.
• Pre-existing conditions waiver: If you want your travel insurance policy to cover conditions you had before your trip, you'll want to buy travel insurance shortly after you make your first trip payment. Typically, you have 14 days, though some companies have a more generous window of up to 21 days to qualify for this coverage.
• Cancellation reasons: Companies can offer different reasons for cancellation. If you're worried about something like a job loss, read the covered reasons outlined in your policy to see if that would qualify. For family-related coverage, see what's included and who counts as a family member.
• Flight delay and baggage delay time limits: All policies state what qualifies as a reimbursable delay. Oftentimes, a flight must be delayed for six or more hours to qualify for coverage. However, some companies require longer delay timeframes to qualify for reimbursement.
• Rental car coverage: Many travel insurance policies offer rental car coverage, but you'll need to make sure it's available on the plan you're considering. Prioritize policies with primary rental car coverage, as this means you won't need to file a claim with your personal auto insurance policy first — and risk increasing your rates — before filing with your travel insurance company.
• CFAR coverage: Look at the reimbursement rate if you're considering these plans. While some companies will reimburse you for up to 75% of your prepaid, nonrefundable trip expenses, other companies only reimburse up to 50%.

There are many great options in the travel insurance space. Aggregator site Squaremouth lets you get quotes from dozens of providers at once. While the brand does receive a commission from insurance companies on its site, there are no extra fees.

American Express' standalone travel insurance policies offer protections not available as regular cardholder benefits — including emergency medical and dental coverage, medical evacuation and travel accident protection.

Travel Guard® plans are great if you need to customize coverage: The mid-range Travel Guard Preferred plan pays out 100% for trip cancellation and 150% for trip interruption, with up to $50,000 in coverage for medical expenses and up to $500,000 for emergency evacuation. There's even a payout of up to $1,000 if you miss your connection.

Faye is an all-online provider with an intuitive app that allows you to file claims completely digitally. It also includes generous travel delay coverage, giving you up to $300 a day and $2,100 per trip for delays of six hours or more.

While airlines must follow government regulations about reimbursing passengers for cancelled flights, the coverage limits may be less than what you laid out. Additionally, the carriers only repay you for your flight, not hotel rooms, theater tickets, or other non-refundable expenses associated with your trip.

And if the airline isn't to blame, you won't be covered at all.

Other travel scenarios require coverage. "During the COVID-19 pandemic, a number of countries made it mandatory for travelers visiting there to show proof of travel insurance coverage. Post-pandemic, most places lifted this requirement, but it remains permanent in several countries," Sloan said, adding that Argentina and Algeria are two examples.

Certain tours can also require a plan. "If planning a trip to Antarctica, expedition and tour operators require travelers to have a travel insurance plan," Sloan said.

Meet our experts

At CNBC Select, we work with experts with specialized knowledge and authority. For this story, we interviewed Rhonda Sloan, the senior vice president of sales and marketing at travel insurance company Travel Guard.

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At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every insurance article is based on rigorous reporting by our team of expert writers and editors. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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