Think travel insurance is a waste of money? Think again. Krista Carothers deciphers the fine print and shows you how to choose a policy that could save you a bundle

Unlike most elements of vacation planning, travel insurance doesn't exactly conjure up images of distant delights that send the pulse racing. Insurance isn't alluring, exciting, or even remotely interesting, which might be why so many travelers don't even consider it when planning their trips. Big mistake. When it comes to protecting your vacation investment and, sometimes, even your well-being, nothing is more important than determining whether you need insurance and, if so, choosing the policy that best meets your needs.

Condé Nast Traveler's Ombudsman receives dozens of letters each year from people who have lost thousands of dollars either because they didn't buy insurance or because they selected the wrong kind. If these readers had realized what they were risking and had protected themselves, they could have avoided major financial losses, not to mention considerable disappointment. For those who think that insurance is an unnecessary hedge against unlikely trouble, a reality check: Christina Hopper, president of the Berkely Group, which provides insurance to most of the major cruise lines, says that between five and ten percent of the travelers to whom her company sells coverage end up making some type of claim.

This magazine has always recommended that you buy travel insurance whenever you book an expensive nonrefundable trip, especially one that you pay for far in advance, such as a safari or a cruise. But that doesn't mean you should automatically accept whatever policy the cruise line or tour company offers. On the contrary, you should shop around to find the plan that's best for you. The challenge is sorting through the bewildering variety of policies offered by travel companies and third-party insurers, each with a confusing array of coverage options, waivers, and benefit limits.

To help guide you, we present this primer. Clip it, save it, and refer to it whenever you're springing for a big trip: If unexpected trouble ever forces you to change your travel plans, we promise you'll be glad you did.

Almost all travel insurance is sold in packages that bundle together various types of coverage and cost between 4 and 12 percent of the total trip price. The three most important benefits—trip- cancellation, trip-interruption, and medical coverage—will protect you from the kinds of losses that could send you to the poorhouse, which is why you should take a close look at these first when considering any policy. (See "Bells and Whistles" for a review of additional benefits for things such as lost luggage, trip delays, and accidental death.)

TRIP CANCELLATION
Perhaps the most important coverage of all, trip-cancellation insurance will reimburse the cost of a cruise or tour if you're forced to call off your plans for any of a number of covered reasons. These include your falling ill, death or illness of a family member (which companies define differently; see "A Hard Lesson"), and a flood or fire in your home. If you haven't purchased this protection and you're forced to cancel, you could easily lose everything you've paid for your vacation. Some policies are more generous than others, even covering events such as a job loss or a colleague's illness, so do your homework to make sure that the one you buy offers the broadest coverage you can afford. And remember: Although premium credit cards often cover things like medical evacuation and baggage delays, they generally do not offer cancellation insurance as a benefit.