Travel insurance policies? Be sure to read fine print

Here’s a topic that inspires fear, loathing -- and boredom.

Yes, we’re talking travel insurance. We fear illness and accidents, loathe thinking about them when we plan a trip and are too bored to plow through 20 pages of fine print on an insurance certificate.

“Nine times out of 10, they don’t read it,” Angela Norton, spokeswoman for CSA Travel Protection in San Diego, said of travelers who buy packaged policies for trip cancellation and interruption, medical costs and evacuation, luggage loss and other mishaps.

Now, some heavy-hitting critics are asking, “Why bother?”

First, Consumer Reports magazinein May ran an article titled, “Travel Insurance: Why You Rarely Need It.”

One of the experts quoted, Bob Hunter, director of insurance for the Consumer Federation of America in Washington, D.C., told me that the typical traveler can afford to forfeit trip deposits and is covered by medical insurance homeowners’ policies or credit cards for other losses.

In emergencies, he added, airlines and other suppliers may offer refunds or waive penalties.

“I never buy travel insurance,” said Hunter, a former federal insurance administrator under presidents Ford and Carter.

Then, in September, Jeffrey Miller, a travel attorney and consultant in Columbia, Md., wrote a piece in the trade magazine Travel Weekly titled “Losing Faith in Travel Insurance.”

After 15 years of encouraging travel agents to sell such policies, which can pay commissions of 25% or more, he wrote, “I no longer believe travel insurance to be a vacation staple.”

Miller said that in the last year, many friends and clients had complained about insurers denying apparently legitimate claims and that confusion reigned over what policies cover.

After his article ran, he said he “got a lot of grief from the industry.”

In separate letters, Brad Finkle, president of the U.S. Travel Insurance Assn. in Richmond, Va., criticized the Consumer Reports and Miller’s articles.

Finkle wrote that the “vast majority” of travel-insurance claims were paid and that consumers needed to take responsibility for reading their policies. Only travel insurance, he added, covers most losses from trip interruptions and cancellations, the most common claims.

Neither the insurance organization nor several insurers I contacted would say how much companies paid in claims. (Organization officials said they didn’t know, and insurers cited competitive reasons for not disclosing figures.) But it is, without a doubt, a big industry.

Americans spent more than $1.3 billion on travel insurance in 2006, the association said. About half of U.S. travelers who take a cruise, a tour or fly internationally buy policies, the association estimates, up from 10% or less before Sept. 11, 2001. My take? Most packaged policies I’ve seen are difficult to read and interpret. But because they cover you for many mishaps and premiums are modest -- typically 4% to 8% of the trip cost -- they can be worth buying if you’re spending thousands on your getaway.

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Sometimes, insurance can really pay off.

Tully Seymour, a retired judge from Newport Beach, figures he collected more than $20,000 on a travel policy that cost him a few hundred dollars after he broke his shoulder two years ago skiing in Austria.

Seymour estimated that his insurer paid $2,500 for his evacuation from the mountain, $8,000 for medical treatment and $12,000 for first-class air tickets to get him and his wife, Janette, home.

“I was just treated royally,” he said.

And although policy exclusions can be mind-boggling, so can the range of coverage, as some Southern Californians learned during the recent wildfires.

The good news: If a natural disaster makes your home uninhabitable before your scheduled departure, many policies will pay for trip cancellation.

The bad news: Insurers don’t agree on what “uninhabitable” means.

At M.H. Ross Travel Insurance Services in Northridge, “uninhabitable” includes mandatory evacuations, even if your home is undamaged, a spokeswoman said.

At CSA and Access America, evacuations usually don’t qualify a home as uninhabitable, but company representatives said they were making exceptions for policyholders in some of the fire-hit areas.

How can you inhabit your home if you can’t get to it?

That’s a riddle only an insurer could answer.

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