How to Make Trip Insurance Pay Off (Sometimes by Not Getting It)

NEW YORK ( TheStreet) -- Surveys show that most Americans will take summer vacations this year, but that lingering concerns about finances will keep many closer to home and make most pay extra attention to getting the most bang for the buck. So, if you're anxious about finances, would it pay to safeguard that big expense by spending a little more for travel insurance?

As with car, health or homeowner's insurance, travel insurance pays off only if something bad happens; it's not an investment like some of the more complex types of life insurance. So travel insurance generally pays only when the stakes and risks are unusually high -- when you will travel to a country with poor medical care, when expenses are especially steep or when you face a higher-than-usual risk of canceling the trip for health reasons or the death of a family member.

As a rule of thumb, policy premiums run between 4% and 8% of a trip's cost, but the price can vary widely depending on what events you want covered and the odds you will file a claim. An older traveler, for example, will pay more for coverage to refund costs if a trip is canceled for medical reasons. Coverage for weather-related cancellation will cost more if you go to a Caribbean island in the June-through-November hurricane season as opposed to midwinter.

Your travel agent or online booking agent may offer insurance, and comparison shopping is easy online with sites such as insuremytrip.com and SquareMouth.com. But first, find out what coverage you may already have.

Your credit card company, for example, may insure trips charged on the card. A resort or cruise line may have a refund policy if weather, natural disaster or terrorism prevents a trip. And it might be cheaper to buy a refundable airline ticket than to use trip insurance to cover the cost of a nonrefundable ticket.

Next, think about which types of events you really need covered. SquareMouth, for instance, offers seven options under its trip cancellation feature: trip interruption, hurricane and weather, terrorism, financial default, employment layoff, cancel for work reasons and cancel for any reason.

On SquareMouth, covering the prospect of canceling a $3,000 trip for a pre-existing medical condition added about $35 to a policy that otherwise would charge about $131.

Because a policy is tailored to your circumstances and priorities, it's best not to wait to the last minute. It's too late to get hurricane coverage, for example, if the storm has already been named, SquareMouth says. Also, hurricane coverage pays off only if your trip is affected directly, not if you cancel because you're worried about a storm that might affect your route or destination.