What is a Travel Insurance Deductible?

Although most people know that travel insurance is a good thing to have in case of an emergency, many people don’t buy any before heading away to a sunny or exotic location. Reasons for not buying travel insurance vary -- some people don’t like to imagine that something negative could happen, while others think that travel insurance is a waste of money. Luckily, insurance providers offer lots of options to save on travel insurance, including deductibles.

What is a Deductible?

A deductible is an amount of money that you take responsibility for before the insurance company pays out on a claim. If your travel insurance deductible is $100, and you find yourself hospitalized for four days with a total bill of $20,000, you would be responsible for paying $100 and your insurance company would pay $19,900.

However, if your travel insurance deductible is $1,000 and your claim is only worth $750, you will have to pay the entire thing -- your insurance company will only pay once the damages are more than the deductible.

How you can Save

“Wait a minute!” you might be thinking. “I might still have to pay my own medical bills even if I purchase travel medical insurance?” Well, that depends.

There are a variety of different travel insurance deductible options. With some policies you have a $0 deductible, meaning you will have no out-of-pocket cost if you file a claim with your insurance company. Other policies will let you increase your travel insurance deductible up to $10,000, while lowering your premiums.

Using even numbers to illustrate the deductible-premium relationship, let’s say you take out a policy with a $0 deductible. It might cost you $100 in premiums. But if you decided to up the deductible to $1,000, you would save a bit on the premium, which might fall to $85. The is no standard X deductible = X savings on premium, but generally, as the deductible goes up, the premium falls.

Every time you increase your deductible, you can save some money. The downside is that if you need to make a claim, your initial savings will be wiped out because you’ll have to pay a potentially large deductible. In countries with low-cost health care there might not be much concern about escalating medical bills, but in countries like the United States, even a $10,000 deductible can be met pretty quickly. Trying to save $50 before your vacation, only to have to pay an American hospital $10,000 if the worst should happen is a tricky gamble that many Canadians might not be comfortable with.

Getting a travel insurance deductible is a great way to save money if you really aren’t sold on the idea of purchasing insurance ahead of your big trip. The higher your deductible, the more money you’ll save initially. However, accepting a high deductible can backfire if your deductible ends up being higher than your medical bills. In countries with extremely high medical costs, like the United States, finding an insurance plan with a $0 deductible is almost a requirement to making sure your vacation is relaxing and worry-free.