Given the uncertainties of life and the vagaries of the weather and world affairs, more consumers are turning to travel insurance as a way to protect their pocketbook if their plans fall through, spending nearly $1.9 billion for that peace of mind.
But some credit card holders get that kind of coverage without spending a dime. (See " Compare credit cards' trip cancellation, trip interruption policies ".)
A stack of different credit cards reimburse your prepaid expenses if you've charged them to your card and your trips are canceled or interrupted, but you need to be clear on exactly what circumstances your credit card insurance covers, and how much of your cash you'll get back.
Cards' coverage free, limited
Some will reimburse only $1,500; others will cover up to $10,000 of your costs. Some will only help out if you're ill or your airline files for bankruptcy; others will cover a whole host of reasons, including terrorism, bad weather, and even a jury duty summons.
Depending on your credit card, your insurance may reimburse you for the prepaid airline tickets, train tickets, hotels and rental cars that you've already paid for using that particular credit card.
"To begin to be comparable to travel insurance, your card needs to provide trip cancellation and trip interruption coverage. Those are the ones that reimburse costs when an injury, illness or death arise, or when weather or natural disaster derail a trip," says Melisse Hinkle, content manager at Cheapflights.com.
Fuller coverage, for a cost
But the coverage through your credit card is likely to fall short of what you can receive if you purchase travel insurance on your own.
Consumers spent close to $1.9 billion for travel insurance in 2012, a 14 percent increase from the previous year, according to the U.S. Travel Insurance Association .
Comprehensive coverage is by far the most popular travel insurance, and typically includes such things as trip cancellation coverage, which covers all prepaid expenses if you need to cancel your trip, trip interruption coverage if you need to cut short your trip, medical coverage and emergency medical evacuation coverage.
These policies usually cost 4 percent to 8 percent of the cost of your trip, says Jim Grace, CEO of InsureMyTrip.com. The policy you choose should spell out exactly what situations are and aren't included.
You can also buy cancel-for-any-reason policies, which allow you to cancel your trip for any reason up to 48 hours before your scheduled departure. They generally cost 8 percent to 12 percent of your trip's cost.
"It's more expensive, but it gives you control over whether you want to go or not," Grace says, but depending on the policy, only 50 percent to 90 percent of your costs are refunded so travelers don't cancel at the last minute.
Card coverage varies
If you're relying on your credit card for coverage, perhaps the most generous coverage comes through Chase. Depending on the card, Chase will provide $5,000 or $10,000 worth of trip cancellation and trip interruption coverage as long as you charged your trip to one of those cards.
The Chase Sapphire Preferred and Chase Sapphire Visa Signature cards, for example, will reimburse expenses for you and your immediate family members for up to $5,000 per person per trip if you have to cancel your trip or your trip is interrupted for a covered reason, such as illness, severe weather, a change in military orders, a terrorist attack, a jury duty summons or your travel company operator goes belly up.
If you've purchased tickets for yourself and your family members, Sapphire card reimbursements are capped at $10,000 per trip, and a maximum of $20,000 over a 12-month time period.
"We offer travel protection benefits to give our cardholders peace of mind from the time they purchase a trip through their return home," says Chase spokesman Rob Tacey.
Most credit cards offer far lower levels of trip cancellation and interruption coverage, and it's granted for fewer reasons. A typical cap is $1,500, and you might only be covered if you or your immediate family member is injured or ill, a family member dies, or the airline you're flying becomes financially insolvent.
Expect exclusions, paperwork
You also need to be aware of exclusions to your coverage. If you have a pre-existing medical condition, it's unlikely you'll be reimbursed if you need to cancel your trip because of that health issue.
If you need to file a claim, because your trip is canceled or cut short, you'll have to provide proof to your credit card company. With a Chase Sapphire card, for example, you'll need to provide a variety of documentation, including information on why your trip was canceled or interrupted, and a copy of your credit card statement showing the expenses you've prepaid.
Chase wants you to provide notice that you intend to file a claim within 20 days, "or as soon as reasonably possible," and then provide the needed documentation to prove your claim within 90 days or as soon as possible. The company says it will pay up within 60 days of that.
Ed Perkins, contributing editor at SmarterTravel.com, says consumers probably choose their travel credit cards based on the miles or points they can earn, but it's worth your while to see if your credit card provides free trip cancellation and interruption coverage.
"There's no downside," Perkins says. "As long as it comes with the credit card, as the saying goes 'it couldn't hurt,'" to make use of it.
Which to rely on?
Because of the limitations and caps on coverage through your credit card, you still might consider purchasing travel insurance to have a greater level of security.
Travel insurance can be worth the money "anytime you have a large prepayment with severe or substantial cancellation penalty if you cancel the trip," Perkins says.
Airlines and online travel sites often will offer travel insurance when you book a flight or cruise, but that coverage is usually extremely limited, with plenty of exclusions.
"They don't really have your back like an insurance company would or even a credit card would," says Jason Clampet, co-founder of the travel news site Skift.com. With the insurance through your credit card, "you are their customer. They want you to keep using their credit card. You're their primary concern."
If you're purchasing insurance, look at offerings from independent companies or aggregators that offers multiple policies, Clampet says.
Even travel insurance you buy on your own can come with plenty of exclusions, so you need to be sure to do your homework before you purchase a policy, Hinkle says. "Make sure you get enough coverage, that it truly covers what you plan to do and that you know and understand what reasons are covered for canceling or cutting a trip short."