Travel insurance policies pack more options

— -- If you're thinking about buying travel insurance, here's the good news: The typical policy covers a lot more than it once did, and companies are rolling out options that offer even more protection.

The bad news: All the new options are making choosing a plan more confusing than ever.

Just last week, one of the largest travel insurance companies, AIG Travel Guard, announced nearly a half-dozen major changes.

For starters, Travel Guard will insure trips that cost as much as $100,000, up from $30,000. The firm also is reaching out to traveling parents by including children ages 17 or under at no additional cost in one of its plans, ProtectAssist.

But perhaps the biggest change at Travel Guard is that for an extra payment equal to 40% of your base premium, it will add a "cancel for any reason" clause to select policies. Customers will be reimbursed for 50% to 75% of the cost of the trip if they cancel up to 48 hours before departure. Until now, customers needed a valid reason to cancel, such as a death in the family.

For an additional $24, customers also can add a "cancel for work reasons" clause to many of its policies.

"We're moving further and further away from one-size-fits-all travel insurance," says AIG Travel Guard's Dan McGinnity.

Such changes are driven by consumer demand, says Peter Evans of InsureMyTrip.com, which compares more than 100 travel insurance plans sold by 18 companies.

Evans says one of the biggest changes the past two years is the addition of language that allows customers to cancel if the destination they're visiting becomes uninhabitable by, say, a hurricane.

Companies also have expanded coverage of terrorist incidents.

"Prior to 9/11, policies were written to cover terrorist attacks in foreign locations but not domestic," Evans says. "Now, if you go through these policies, you'll find they read 'foreign and domestic.' "

The changes can be confusing. But as Evans notes, the typical package policy is less daunting to understand if you break it down into its parts.

Here's a primer on the main elements in most package policies (customers also can buy individual types of coverage separately):

•Trip cancellation insurance. This reimburses you for the cost of your trip if you have to cancel because you or someone in your family becomes ill or injured, or if there is a death in the family. Definitions of "family member" vary, so read the fine print.

Other covered reasons for trip cancellation can include bad weather, an accident on the way to the airport, financial default of your travel company or jury duty.

•Trip interruption insurance. This reimburses you for the unused portion of your trip if you have to cut it short due to an illness, injury or death in the family. It also covers any extra costs incurred to get home, which is why policies sometimes cover up to 125% or 150% of the cost of your trip.

•Travel baggage insurance. This reimburses you for the contents of your luggage if it is lost, stolen or damaged. Most policies limit the reimbursement to $500 or $1,000 and exclude items such as eyeglasses, contact lenses and cash.

•Travel baggage delay insurance. This reimburses for the cost of toiletries, clothing and other items needed to tide you over if your baggage doesn't arrive when you do. Many policies say your bags have to be at least 24 hours late and limit claims to $100 or $200.

•Travel delay insurance. This reimburses for unforeseen expenses if your trip is held up due to a flight delay, natural disaster, lost or stolen passport, etc. Delays usually must be for at least six hours, and most companies limit reimbursements to $100 or $200 a day.

•Medical insurance. This reimburses for expenses not covered by your regular medical insurance. Medicare and Medicare HMOs, for instance, rarely cover illnesses and injuries that occur abroad.

•Emergency medical evacuation. This covers medical evacuation if you become ill in a place without adequate medical care. The insurance will pay for the cost of a helicopter or air ambulance jet to transport you to the "nearest adequate medical facility."

Some companies now allow customers to upgrade coverage to include transportation to a hospital of your choice — a change that can mean the difference between being taken to a local hospital in a foreign country and being flown back to the USA. Travel Guard last week added such an option for an additional $17 per person.

Be sure to check the limits on this coverage. It's not uncommon for the cost of an air ambulance to exceed $25,000, so it's worth paying for a policy with a high limit.

Packages, policies and what's covered

More than a dozen companies in the USA sell travel insurance. The most popular product is the so-called package policy, a comprehensive offering that includes coverage for just about anything that could go wrong on a trip — from a medical emergency to a lost bag. The typical package, sold on a per-trip basis, costs roughly 4% to 8% of the value of the trip, depending on the age of the traveler. A sampling of some of the most popular policies and what they offer (costs shown here are for a 65-year-old couple taking a one-week, $6,000 cruise in March, as quoted by InsureMyTrip.com).

Source: USA TODAY research; InsureMyTrip.com