When does it make sense to purchase travel insurance? - Travel insurance - ghlatest
Most likely never.
Purchase travel insurance - Note, I'm assuming you are referring to "trip cancellation insurance". If you think about it, travel insurance companies are out to make a profit so they assume some great probability that you won't make a claim. This should mean that <(cost of insurance/cost of the ticket) on average, you are not likely to need to make an insurance claim. Let's imagine you bought a flight for $1,000 and were going to pay $60 for travel insurance.
The insurance company is only making money if people make claims less than 6% of the time, probably half or less of that which means they think you have a ~1:30 chance that you'll need to use it. If you're healthy and don't anticipate any reason for problems with your trip, it might be more like a 1:1,000 chance that you'd use it. The bottom line is that the odds are very, very low that you will use it which is why they can profit from offering it in the first place.
Also Check: What do you know about travel insurance?
People generally buy insurance to protect against the risk of severe financial downside. For example, health insurance makes sense for most people because while they might not actually take advantage of enough medical services to warrant the premiums paid (even up to $5-$15K/year per family), the worst-case outcomes could result in financial ruin and likely bankruptcy (one heart surgery could cost $200K+ out of pocket).
In the travel insurance case, the worst-case outcome is likely less than $1-$2K at most for an individual flight, even up to $10K for a family trip which would probably not ruin your life (especially since you were already prepared to spend the money anyway). In that case, you are probably best off never buying travel insurance and just dealing with the 1:1,000 case if you have to cancel a trip.
Lastly, if you do opt to buy travel insurance anyway, it's really important to read the fine print on what even "qualifies" for a reimbursement. It's often the case that simple illness does not qualify, further reducing the value.
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