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Is Your Airline’s Trip Insurance Worth It?

Some airlines use scare tactics to entice customers to buy their trip protection, but experts say there are better options

a traveling woman trying to decide if she should pay extra for airline trip insurance
Before you complete your plane ticket purchase, airlines ask you to add trip insurance.
Getty Images
By

Adam Pitluk,

 
AARP
Published July 20, 2023

Navigating all the charges associated with booking an airline ticket can be as challenging as ensuring your checked bag meets the weight limit.

You’ve got luggage, cabin class, boarding position and food add-ons to consider as you book your ticket. But what about your airline’s trip insurance? Is it worth it?

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You’ve been there: You’re nearing the final part of your checkout on an airline’s site — you’ve picked your seat, you’ve added a checked bag, and then you’re required to specify whether you’re adding trip insurance.

Be mindful that airlines try to get you to spend about 7 percent of your ticket price on added insurance through their website, says Suzanne Morrow, senior vice president of insuremytrip.com, an online travel insurance comparison website. The problem is they’re generally not the underwriter of the insurance, and if you try to collect, the airlines will pass the buck to the underwriter.

Douglas Heller, director of insurance for the Consumer Federation of America, a nonprofit research, advocacy, education and service organization, considers this push to buy trip protection when purchasing a plane ticket a scare tactic.

“When you are purchasing travel, you’re in this sort-of captive environment, and then you’re being presented with this option to buy this other product and it’s not even clear: Is it insurance? Is it something else?” Heller says. “And in fact, it’s oftentimes both insurance and not insurance that gets bundled together, which is a problem.”

Airlines didn’t always charge for every little thing. But in 2008, during the global financial crisis and amid rising fuel costs, airlines started charging for ancillary products, such as checked bags. The $15 fee to check a bag seemed like a king’s ransom, but travelers paid it. That year, airlines made more than $1 billion in baggage fee revenue.

To be clear, trip insurance on its face is not a bad thing. For some travelers, knowing that they are covered if they have to cancel their trip, or if they were to be injured while traveling or need medical care while abroad, is just the sort of warm blanket needed to calm their nerves. What Heller and other experts object to is the pressure campaign waged by the airlines to essentially scare or shame you into spending to protect a trip that is probably already protected in the event of a cancellation or a rescheduling.

“You should always decline the travel protection that is offered by an airline or a cruise line or any other travel provider at the time of purchase,” says Birny Birnbaum, executive director of the Center for Economic Justice, a nonprofit education and advocacy center representing low-income individuals. “The reason is it’s extremely difficult to understand what is covered and what is not. The price you pay is inflated by the tremendous amount of compensation that the insurance company pays the airline for the privilege of using the company’s website to sell their product.”

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Trip insurance shouldn’t be one-size-fits-all

The process whereby various insurance companies pay a premium to airlines to be the only insurance carrier offered at the time of purchase is known as reverse competition. When companies compete for consumer business, they must keep their prices competitive to lure customers. However, when insurance companies compete against each other to get on an airline’s website, the airline essentially makes the insurance companies outbid each other to be the company presented to customers when buying a ticket. The compensation the insurance company pays the airline for the exclusive right to appear on the airline’s website drives up prices, says Birnbaum. As such, you’re probably overpaying for the airline’s third-party insurance because the insurance company has to make up the cost it paid the airline.

“It’s a water-downed version of trip insurance if you go through the airline’s website,” says insuremytrip.com’s Morrow. “For the same price, if you look through a company like us, you get a much better coverage plan and a lot more detail.”

Morrow continues, “Additionally, age, destination and trip cost should be factored into a policy. If you want a more high-end plan, we put plans into three different buckets: economy, mid-tier and premium. Plus, if you’re older, a lot of times it’s more expensive. A 70-year-old is going to have different considerations on a trip than a 20-year-old, so a one-size policy does not fit all, and the airlines are only offering a one-size-fits-all policy.”

Both Birnbaum and Heller advise air travelers to reject the airline-offered trip insurance and instead, go to third-party insurance aggregators like squaremouth.com, travelinsurance.com or insuremytrip.com to see what various insurance companies are offering for coverage, and the price they offer as well.

That’s not to say there isn’t value in the insurance offered through the airlines at the time of trip purchase. There is. But without the benefit of competition, it’s difficult to know exactly what you are buying, who is underwriting the policy, the extent of the coverage and whether you’re paying for coverage you already have through your homeowners policy or the airline’s own policy on cancellations and lost luggage.

The US Travel Insurance Association, an organization that represents the country’s biggest travel insurance organizations, did not respond to requests for comment.

“My problem, and the warning that I have for consumers, is the structure of the market and the lack of transparency about the product and its pricing make it very difficult for a consumer to get a fair deal,” Heller says. “Particularly if you’re in the hard sell, captive environment of buying your ticket.”

Megan Moncrief, president of squaremouth.com, says the best way to make sure the price of travel insurance is worth the cost is to shop around. While that seems like a labor- and time-intensive task, squaremouth.com, insuremytrip.com and other aggregators do the work for you.

“If you’re thinking about travel insurance, it doesn’t hurt to check out what different companies are charging,” Moncrief says. “Of course, if you don’t like what’s out there, you can still buy the insurance through your airline after the [purchase of your ticket]. But when people see what else is out there, they don’t tend to go back to the single coverage the airline is offering."

Adam Pitluk is an award-winning journalist and book author. He is the group publisher of Midwest Luxury Publishing and Groom Lake Media. 

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