Use a Deductible to Cut Your Cost of Travel Insurance

The recent spate of manmade and natural disasters has shown that travel insurance is more important than ever. But as the costs of travel and medical care keep rising worldwide, you need to find ways to keep the costs of protecting yourself affordable. For your next trip, think of getting a deductible. You can save a lot.

A deductible is the portion of a claim you pay before the insurance kicks in. That can be zero dollars, or $50, $100, $1,000, or even $10,000. The greater the deductible, the greater the savings. It’s possible in some cases to save as much as 30 or even 50 per cent off your premium—which, if it is meant to cover you on a long trip costing a couple of thousand dollars, can add up to major savings, especially if you travel every year or several times a year.

I know of snowbirds in their mid-seventies who have saved enough in premium discounts due to deductibles over five years to pay for a sixth year of coverage—in effect a bonus. Even a $100 deductible can add up over the years, and when you consider how little that represents of your travel costs, it seems negligent not to take advantage of it.

Insurers can afford to give you these savings because the manpower and paperwork they expend processing small claims far exceeds their value. If they can rid themselves of $100 or $500 claims, they can pass on substantial savings to you. Most people I know have at least a $500 deductible for their car and they think nothing of it. Isn’t your health more valuable than your car?

It’s also worth looking at statistics. The great majority of travellers has never encountered a major medical emergency or had to submit a claim. Review your own history of the past 10 or 20 years—how many claims have you generated? How much would you have accumulated if you had saved 10 or 30 per cent of your premiums? Do the math and you may be surprised.

I like to think of insurance as a protection for major catastrophic events, ones that can seriously and permanently hurt your finances. I don’t much see the value of paying out $100 to protect $1,000. The odds don’t seem right. But, then, you have to make that judgment, and you have to feel comfortable knowing what you would be capable of handling if a major health emergency hit you while travelling. Protecting your comfort level is valuable too.

But if you can save several hundred dollars in premiums every year, and you are in reasonable health, comfort becomes less expensive.

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