Travel Insurance gave me an ROI of over 500%!

I love insurance. Love it. I wrote about the importance of life insurance on a guest post called “Why Spending Money on Life Insurance Trumped Building Up the Emergency Fund” at Invest It Wisely. We have $60,000 worth of stuff insured with renters insurance and we have car insurance. The biggest bang for my buck I ever received was for travel insurance.

What is it?

Travel insurance covers anything relating to travel from trip cancellations, to medical emergencies, to providing a spending allowance to replace clothing in case of delayed baggage.

Why did I opt for it?

I purchased it for my honeymoon. It was about $160 for both of us. I had a bunch of concerns regarding my honeymoon and I did not want it ruined on account of some sort of travel delay or lost luggage. My fear was that the airline would lose our luggage; we were traveling on December 27 and not returning until a couple days after New Year ’s Day. I did not want all of our honeymoon pictures to have me in my “traveling” outfit or not be able to go out for a nice dinner because I only had a super casual outfit. I know that I could purchase more clothes if my luggage was delayed, but we were going to Germany. I was not familiar with the stores in Germany. I was unsure how expensive the clothing would be. If I wanted to be dressed up, I would need a top, a skirt, and shoes. That could easily be $300 in a large city, especially since I did not want to spend my time bargain hunting.

The plan I purchased had a $500 spending limit for delayed baggage. If the luggage was delayed for more than 36 hours, the policy would reimburse each of us up to $500 for necessary clothing. To me, 36 hours was a reasonable amount of time. Yes, I would have to wait, but I would still have a couple of days on my honeymoon to find something dressy and not have to be concerned about the costs.

What did it do for me?

My luggage arrived in Germany! Yeah! My fears were assuaged and life was good, until we headed home. We made it back to the United States. Our luggage did not. It was “delayed”. First one day went by, and then it was going on two days. I was missing some of my favorite pieces of clothing. I realized that my policy allowed for clothing purchases on the way back as well. It makes sense. What if you lost your suits and you needed them for work when you returned home?

After 36 hours I headed to the mall, a mile from our apartment. My husband was at work so I made purchases for both of us. I purchased a pair of shoes for each of us. I purchased three sweaters and two pairs of pants for me. I also purchased “unmentionables” for me. I got my husband two pairs of pants from Brooks Brothers and two shirts from J. Crew. Our total bill was around $950.

When I got back from the mall, the luggage had arrived. So what was I to do…return everything? Nope. I followed the guidelines. The luggage was lost for 36 hours and I could spend up to $500. I filed a claim receipt. I got a check for around $950.

Thoughts to consider…

Luggage is often late and sometimes lost. When I went to study in Austria as an undergraduate student, my luggage was delayed. I left the United States in January. My flight left late and I remember running through the airport in Amsterdam trying to make my flight. I made the flight but my luggage did not. It took about 24 hours for it to be delivered.

Often if you are taking a big trip, you might require specific clothing for your trip. If you are going skiing, you will need ski clothes. Perhaps you are attending a wedding, and need to wear a suit. Finding these items in the United States is relatively easy. There is a tremendous range of prices in the United States as well as variety. Also there is no language barrier in the United States, so it would be easy to find out from the locals where to shop, if necessary. If you are traveling in the United States and you lost your luggage, and you needed a suit, you might be able to have a friend stop by your house and overnight the suit to you.

Thus, it does not seem that necessary to have travel insurance with a high limit for delayed baggage if you are traveling in the United States. However, if you are leaving the country, it is worth considering. Moreover, if you are out of state, your medical insurance will probably cover you for treatment at a local hospital if necessary. When you are overseas, insurance coverage is far more complicated. Thus, having a policy that will cover medical emergencies adds to peace of mind.

So what was my “bang for my buck”?

ROI stands for “Return on Investment”.  The formula for calculating ROI is:

ROI = [(Payback - Investment)/Investment]*100

My payback was $950.

My investment was $160

493=[(950-160)/160]*100

From a $160 investment, I obtained $950 in clothing! Nearly a 500% increase!

How do you find travel insurance?

I purchased mine through Orbitz. However, I wanted to dig a bit deeper for all of you. I came upon a site called the TripInsuranceStore.com. The site has a A+ BBB rating and offers various plans. Below is a small sample comparison of what different companies offer. Some of the more expensive plans have greater degrees of service. I was impressed with the plan that offered $600 when baggage is delayed only 12 hours.

Have you ever had your luggage delayed? What effect did it have on your trip?