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Many credit cards, especially those that offer frequent flyer miles as rewards and are tailored toward travelers, offer travel insurance as one of the benefits. It's just one of the many perks of good credit and good credit cards.
Of course, to take advantage of any of these insurance perks, you will need to use your credit card to pay for the trip. So it is important to know what is covered, and when.
While our review will help to give you a general understanding, after reading it, you will want to read the terms and conditions of your specific card.
Types of Travel Insurance
Your credit card probably offers several types of travel related insurance. So, let’s first define some of the more common types of travel insurance:
- Lost or Damaged Luggage Insurance - As its name implies, this covers you up to a specified dollar amount if your luggage is lost or damaged on a common carrier (typically a plane, train, bus, or ship).
- Trip Cancellation Insurance – If your trip is cancelled or interrupted due to illness, injury, or death in your immediate family, your credit card company will reimburse you all or part of the costs of the trip, including airfare and hotel.
- Travel Accident Insurance – Travel accident insurance varies widely in the amount of coverage. For instance, many MasterCards cover you against accidental death and dismemberment, above and beyond what your common carrier might pay. Other travel accident insurance will cover your medical costs if you are injured on a trip that you booked with the credit card. This is especially important when traveling overseas, where your medical insurance policy may not be accepted.
Now that we know what types of travel insurance coverage are available, how do we obtain travel insurance using our credit card?
How to Get Lost or Damaged Luggage Insurance
Many cards offered by American Express, Discover, Mastercard, and Visa offer this insurance, with varying limits on the amount of coverage.
For instance, at the time of writing, the Visa Signature card offers up to $3,000 in coverage ($2,000 for New York State residents traveling within New York).
Most American Express cards provide up to $1,250 in coverage for carry-on baggage and $500 for checked baggage, with an option to purchase additional coverage prior to a trip.
Read the fine print on your statement – or call your credit card-issuer—to find out how much coverage you have with your credit card of choice.
In many cases, the “value” of the stolen items is not determined by replacement value, but the cash value of the item with deduction for depreciation with use or over time. Additionally, this insurance often kicks in after your common carrier’s insurance plan.
How to Get Trip Cancellation Insurance
This type of insurance isn’t as common as lost or stolen baggage coverage. A selection of Citi cards provide trip cancellation insurance of up to $1,500 when you book the trip with your Citi card.
It was difficult to find information about trip cancellation insurance on many other cards. MasterCard mentions its availability, but does not list limits or conditions.
If your card lists trip cancellation insurance as one of its benefits, make sure you read the fine print.
In most cases, your trip is not covered if it was cancelled due to war, terrorism, or natural disasters.
If you plan to travel to a “high-risk” area and are paying a lot for your tickets, you may consider purchasing trip cancellation insurance separately to be sure you’re covered if your trip is cancelled for any reason.
Travel Accident Insurance
Discover advertises one of the more generous travel accident insurance plans if you fly, with up to $500,000 worth of coverage for injury, death, or dismemberment.
Discover also offers a host of travel accident benefits, including cash advances for medical treatment and emergency transport. However, the website implies there may be a charge for these services – it is not an insurance package, but a customer service plan.
I'd recommend calling for details before you book a trip with your Discover card -- the customer service reps will more than likely be happy to help.
Many MasterCard credit cards offer travel accident insurance in the event of death or dismemberment, but not for other injuries.
The American Express Blue Sky card – one of the better ones for travel insurance – offers $100,000 in travel accident insurance when you book your trip using your AMEX card.
In general, many travel-oriented cards and some other credit cards offer some level of travel insurance.
The Bottom Line
Call your credit card issuer before your trip. If you have a choice of credit cards to use during your trip, weigh the benefits of different rewards programs, miles you may cash in to defray the cost of your trip, and the value of the travel insurance offered. Only then can you decide on the best credit card to use when paying for your journey.