The Basics Of How Travel Insurance Works

According to a survey in 2018, about 38% of Americans are likely to purchase travel insurance before traveling abroad. I think this number will continue to increase as more people start to understand the pitfalls of being in a foreign country when a problem arises, without having purchased coverage beforehand. Countless people have fallen into a terrible financial situation because of this very scenario. Protection is important.

Today I’m going to teach you the basics of how travel insurance works. Honestly, it’s not complicated at all. But I can assure you that failure to have travel insurance before leaving on your trip may result in incredibly complicated situations. Let’s begin.

travel insurance can be helpful to cover medical costs
Sometimes hiking up to get a good Instagram photo is a bit risky. Good Travel Insurance coverage is important!

The Basics Of How Travel Insurance Works

  1. Research & Buy Travel Insurance
  2. If Problem Arises, File a Claim
  3. Pay Deductible, If Applicable
  4. Receive Reimbursement

1) Research & Buy Travel Insurance

Choose a policy with coverage that fits your needs. If you plan to go Adventure Traveling in Asia, it is quite important that you have good travel insurance that will cover your unique activities. For example, if you plan on skydiving, you will probably want to have coverage before you jump. Right? Well, many insurance companies refuse to cover activities like this. It is important to do your homework. Here are my favorite travel insurance companies that cover all kinds of amazing activities!

In addition to activities, it is important to choose an insurance company that has a deductible which fits your needs. You can purchase travel insurance with a $500 deductible all the way down to a $0 deductible. The price of your premium, obviously, will be different. There is no right or wrong choice, really. Choosing a company with a high or low deductible is completely up to you.

In my opinion, if there are two separate companies that have the same coverage but different deductibles, I tend to believe that it is more beneficial to choose a high-deductible ($250 for example) for expensive countries, such as some European countries, and a low deductible ($0) for traveling to Asia. 

If you are traveling in a western country or Europe and have some type of infection, the final bill will most likely be more than $250 USD so therefore, paying a $250 deductible will be cheaper than paying for the treatment with cash. 

But if you are traveling in Asia and you get the same infection, there’s a pretty good chance that the total bill will be significantly less than that of a western or European country. Possibly less than the $250 deductible. So therefore, you would never use your insurance because the overall cost would not meet the deductible. 

You may have a special scenario in which your circumstances may be different. So, the choice is always yours. I am just simply giving you my way of thinking. Also, if you are going cover your trip, you should probably learn when the best time to buy travel insurance is.

2) If Problem Arises, File a Claim

If you unfortunately end up in a situation, and you need to use your travel insurance, you must then file a claim. 

Maybe you went to the emergency room for a terrible accident and you need to file a claim, or, maybe your trip has been delayed significantly and everything is out of your control. 

There are hundreds of unique scenarios that may arise that require the help of your insurance company. Hopefully it doesn’t happen. But if it does, you need to know how to file a claim. 

learn how to file a claim with travel insurance
Here’s an example page of starting the claim process with World Nomads.

How To File A Travel Insurance Claim

It is usually quite easy. You can file a claim using your phone, laptop, or you can call them if you wish. The filing process is usually not very complicated. It’s pretty straightforward. Just type in all of the information that they request from you and submit all paperwork that you have which is related to this particular loss. Then wait for a response.

As a side note, if a loss does happen, it is important to keep a photocopy (or take a photo) of all of the paperwork and documents that you are given from related parties (hospitals, airlines, police, etc). Receipts or even if it’s just general information that a local company has sent you –  keep it and copy it. It may be important evidence in regards to your claiming-process. Too much information is better than not enough.

As another side note, usually individuals have 24 hours to report incidents to specific parties within the local country. If you are robbed, it is important to inform the police and make a report within 24 hours of the event taking place. Failure to do so may result in a denial of your claim. Every insurance company is slightly different, however.

3) Pay Deductible, If Applicable

During the process of filing a claim, you will eventually need to make a payment of your deductible.

What Is A Travel Insurance Deductible?

A deductible is the amount of money that you must pay in order to file a claim through the insurance provider. Some insurance companies have a $500 deductible and some insurance companies have a $0 deductible. There are other deductibles in between, as well.

Generally, the lower your deductible is, the higher your premium will be. The higher your deductible is, the lower your premium will be.

learn how travel insurance works before you leave
Random rainstorms on a motorbike may be funny…until the tires slip out from under you..

4) Receive Reimbursement

Generally, most insurance companies will send you your reimbursement check after your loss took place. For example if you kept your bags inside your hotel room and went out for a walk, and returned to see that all of your belongings have been stolen – then if your claim is approved, you will receive reimbursement after the event takes place.

But events such as hospitalizations are a little bit different. You can usually present your travel insurance card to the hospital, and your insurance company will be billed directly. This is a better option than needing to pay $10,000 with your credit cards and then being reimbursed later.

However, sometimes travelers need to pay for hospitalizations in advance. There are times where you do need to visit a Hospital in the middle of nowhere and insurance companies aren’t something that this particular Hospital works with. So, it is important to keep all of your documents and receipts, and share all of them with your insurance company when you file a claim.

If your claim is approved, then you will receive reimbursement after you have paid the hospital with your own payment. This is not an ideal situation, but it may happen. Take clear photos of all of your documents, paperwork, and receipts. Maybe even take a few photos of yourself while in the hospital just to be safe.

travel insurance can help with foodborne illness
Trying random street foods around the world is fun…until you get food poisoning.

How The Basics of How Travel Insurance Doesn’t Work

Have you ever heard of Insurance Fraud? This is basically any act with the intent to lie or cheat about an incident in order to receive reimbursement from an insurance company. 

Types Of Travel Insurance Fraud:

False Claims

Telling the insurance company that you broke your leg and paid for it at the hospital when you actually never broke your leg nor went to the hospital. You are hoping to convince the insurance company that this all happened so you can receive a large reimbursement check. You try to forge documents and convince them that this particular scenario happened.

Inflated Claims 

When you file a claim, you make the scenario sound worse than it actually was. Someone stole your purse with all your cash and credit cards, but in order to increase the reimbursement check, you tell the insurance company that you also had a bar of gold inside as well.

Faked Death

You and an accomplice work together to convince the insurance company that you have died in order to receive a large settlement check. 

Application Fraud

When you apply for your insurance, you write false information in order to get a cheaper rate. Maybe you are 55 years old, but you lie and tell them that you are 25 years old in order to get different pricing.

do you know how travel insurance works?
What if you walk out in to this beautiful water and step on a poisonous sea urchin?

You Probably Shouldn’t Commit Insurance Fraud

In other words, don’t. If insurance companies get the feeling that you are trying to commit insurance fraud against them, there’s a good chance that not only they will deny your claim, but they will involve the authorities. This may even involve the FBI. My guess is that you don’t want this type of excitement in your life.

The way to avoid all of this is to simply follow the rules. Buy travel insurance after you have purchased your trip and your plane ticket, and then simply use it as intended. If a problem does arise, then absolutely file an honest claim! But don’t try to intentionally cheat the system. Insurance companies are trained to seek out and spot fraud. 

learn how travel insurance can help with injury emergencies
It’s all fun and games until the Ferris Wheel comes off the hinges and it rolls away with you inside. Ok, that’s a bit extreme lol

Is Travel Insurance Worth It?

Yes! Travel Insurance is definitely worth it! Insurance is a huge piece of mind! Can you imagine traveling to a foreign country and ending up at a hospital from a reason that was not your fault at all? For example, you are sitting in a taxi at a stoplight waiting for it to turn green when suddenly someone smashes into the back of your car. You are extremely injured. You are rushed to the hospital with injuries and are hit with massive hospitalization bills that you cannot afford. Now what? 

Exactly! Don’t try to convince yourself that travel insurance is unjustified. Here are a few reminders why travel insurance is justified. Will there be times when you travel to a foreign country with travel insurance but never need to use it? Yes. In those particular situations, you paid for peace of mind.

Try not to focus your attention on how much money you can save by not purchasing travel insurance, but rather, focus your attention on how much money you may lose if you don’t have travel insurance when you need it the most. 


Hey - I'm Brock. I grew up in the USA, and I have been a full-time Solo Traveler since June of 2016. I am also a Travel Vlogger on YouTube where my primary focus is to simply hang out with local people around the world. My full story is here: About Me

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