There’s a good chance you'll encounter some special insurance needs on your summer trip. For the most part, travel insurance is pretty cut and dried, but you need to take care with two types of insurance.
Rental Car Collision. If you rent a car during your trip, you'll encounter what has been a major headache for decades: how best to insure against the risk of paying for damage to a car you rent. You have four options:
• A rental company will be happy to sell you a collision damage/loss waiver (CDW/LW). If your rented car gets banged up, you just turn it in and walk away. That sounds ideal, except for one flaw: The price, at up to $30 per day, can nearly double the total cost of the rental. It’s obviously hugely profitable for the rental company, so the rental rep will push it mightily when you sign your contract.
• For domestic travel—or in Canada—collision insurance on your own car(s) may cover you. But typically those policies include a deductible that can be stiff, so you'd be out of pocket. Also, some policies limit coverage to rentals for use when your car is being repaired, not for tourist rentals, and some limit the types of vehicles covered. In any case, a claim at many companies will raise your rates next renewal. And domestic policies don’t cover you in other countries.
• Many credit cards include free collision coverage, but there are big differences. Coverage on most cards is secondary, meaning you must first claim on your regular insurance, with the accompanying problems. At best, the card covers only your deductible. Also, the card might not cover all the charges a rental company can pile on.
The best credit-card coverage is primary, meaning the card pays the full amount and you don’t have to report the damage to your own insurer. It’s available on only a few travel-oriented cards, including several Chase cards with United Airlines and Ink and some Capital One cards. Of course, secondary domestic coverage is de facto primary outside the U.S. and Canada, although some cards exclude coverage in a handful of foreign countries. At the other end of the scale, Citi and Discover have stopped offering collision coverage on almost all their cards.
• If you need primary coverage no matter what, you can buy third-party coverage from the big online agencies or through outfits such as insuremyrentalcar.com at far less than the rental companies charge.
Clearly, rental company CDW/LW gives you the most peace of mind. But it comes at a very stiff price. Don’t make a final decision on a rental until you carefully read the fine print of (1) your own collision policy and (2) the credit card you use for rentals. Also, if you travel a lot, getting a primary-coverage card for just the rental coverage can be a good idea.
Trip Cancellation. A full examination of comprehensive travel insurance is for another time, but one coverage is often not clarified. If you cancel a trip for a covered reason, trip-cancellation insurance (TCI) covers prepayments and deposits you can’t recover from the suppliers—coverage that’s detailed in most comparison guides. But I’ve seen very little information on one question: If a nonrefundable air ticket allows you to retain the dollar value of a canceled ticket for a period of time, does TCI cover your full payment immediately, even if you retain value for later use, or does it require that you wait out the validity period for the credit before it pays or surrender the credit/voucher? I’ve run this question past my go-to travel insurance sources, and the answer seems to be, “It depends on the insurer.” These days, most airlines still allow you to retain the value of a canceled flight, so this is a live question. My recommendation is obvious: Make sure you ask about this specific contingency before you buy insurance.
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