Summer is kicking into high gear. The kids are out of school, the fourth of July is upon us, the heat index is high (dangerously so, for some), and people are taking vacations, myself included. In fact, as I write this, we are just taking off from DFW Airport in Texas, on our way back from a fantastic family vacation in San Francisco, California.
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This is probably not the best time to think deeply about vacation-related accidents, but I have a few hours without walking to the next trolley, taking pictures of the local sights, or eating yet another high-calorie meal. So here I am, on the way to a cruising altitude of 33,000 plus feet, wondering how a properly designed wing system and a pair of well-maintained engines help this very heavy people mover defy gravity, while trying to focus on risk management.
I'll start by going back over a month ago, when we were planning the trip. My mom, whose idea it was to take the trip to begin with, said she wanted to get trip insurance, and suggested we look into it as
well. She had actually bought - and even used similar
trip insurance in the past - and so now she usually
gets it on her more expensive trips.
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Trip insurance works similar to other types of insurance where you can pick and choose the coverage and amounts you are interested in obtaining. You can choose from medical coverage in the event you become sick or are injured while outside of your normal health coverage plan (obvious factors to consider here are what your health insurance or medicare plan does not cover). You may also elect to purchase travel protection that can reimburse you for prepaid reservations if your trip is delayed or canceled. There are even policies that include baggage protection should you have items lost or damaged while being transported. You may also add accidental death or dismemberment coverage just in case you are killed or dismembered while flying in a jumbo jet or riding a cable-car on the way to Fisherman’s Wharf (if you have life insurance, you probably don’t need this).
My wife and I talked about coverage based on the cost of the insurance, and what we felt were fairly low odds of needing the insurance' As a result we decided to pass. After all, that is what voluntary insurance is about - factoring in the cost of the insurance, the odds of mishap, the cost of not having the insurance, and the peace of mind that supplemental insurance is supposed to impart.
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Let's face it, any number of unfortunate accidents could have occurred before or during our trip that would have prevented us from going at all, or that could have cut our trip short. This occurence would have cost us thousands in unrecoverable expenses, as a result setting us back financially. Then again, nothing did happen, and in hindsight, we made the right decision and saved almost $500. For me and my family of four, the cost of the plan was just too much for what we perceived as the odds of anything happening that would prevent us from taking our vacation.
For my mom, the cost of her plan was outweighed by the cost of her trip, should something unexpected come up as had happened before. Nothing happened to her either, but her plan was much less, and it was worth it to her for the peace of mind she enjoyed.
While we were away, we rented a car for two days to go sightseeing beyond the San Francisco area. When I got to the counter, it was suggested that I might want to opt for up to three different types of insurance; collision coverage for the rented vehicle, liability coverage for damage I might cause to others, and medical coverage for me and my family should we be injured while using the rental.
I'm not going to say it was a particularly hard sell, but even after I mentioned that I have full auto coverage and health insurance, the rental agent briefed me on some of the potential advantages of purchasing their plan, like not having to file a claim with my own insurance company. Let's just say that I wasn't swayed. For me, the value of convenience and peace of mind is fairly low, especially when combined with my experience at not needing such supplemental insurance in the past. If just one factor was different (for example, if I didn't have good auto insurance), I may very well have opted for the relatively inexpensive rental car policy.
This is not to say you should always reject trip insurance or supplemental rental car coverage. Especially when driving an unfamiliar vehicle, in a strange place, the odds of accidents increase exponentially. Also you need to factor in the driving habits and conditions at your destination. Needless to say, everyone has their own tolerance for risk, and everyone values intangibles like convenience and peace of mind differently.
Knowing how to deal with risk avoidance and risk management is all about being tuned into your own thresholds for dealing with risk, as well as knowing what risk management plans you already have in place. This and common sense will go a long way towards helping you make financial decisions in this area.
Until next time, whether you are lighting off fireworks left over from the Fourth of July, or traveling near or far away, have a safe, happy, and healthy summer!
Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.