I’m sure I can speak for most people when I say that sometimes you can plan your vacation down to the last detail, but the universe has other ideas for you: it wants to test your patience and challenge your ability to adapt. And on a personal level, I swear the universe sometimes wants to completely derail my happiness.

Everyone has a story about a trip that went sideways. For me, it was just this past March when I went skiing to Austria. So many things went awry that at one point my husband and I looked at each other and wondered whom we had “wronged” to deserve so much bad luck.

The trip included a badly twisted ankle, delayed flights, an airport strike, luggage that went missing for four days and a torn meniscus. And all of this occurred within the first five days of the trip, which is why I was convinced that the universe wanted to completely derail my happiness.

After that trip, my husband and I began to talk about whether we should start buying travel insurance to protect us – financially at least – from these types of things. We were able to claim some of the expenses with the airline (such as incidentals and clothing we had to purchase while our luggage was lost), but this was not an option with some other things.

It really does make you wonder what you can do to mitigate some of the financial risk when your vacation begins to unravel.

Let’s face it: travel is becoming more expensive, and I go back and forth on whether it makes more sense to pay for travel insurance, or simply book refundable rates for everything.

Although both aim to provide flexibility and security, they ultimately serve different purposes and come with distinct benefits and drawbacks. Understanding the advantages and disadvantages of each can help travellers make informed decisions tailored to their specific needs.

So, let’s break it down and look at them both.

What is travel insurance?

Travel insurance is a policy designed to protect you against a range of potential issues that can disrupt a trip. These may include trip cancellations, medical emergencies abroad, lost or stolen baggage, flight delays and other unforeseen events. Essentially, travel insurance acts as a safety net, providing financial reimbursement or assistance if problems arise.

Advantages of travel insurance

• Comprehensive cover – depending on the policy, it can protect against a variety of issues, including medical emergencies, trip cancellations and even emergency evacuations

• Financial protection – if a trip is cancelled due to illness, severe weather or another reason covered by the policy, insurance can reimburse non-refundable costs, such as flights and hotel bookings

• Peace of mind – knowing you have coverage can reduce stress while travelling, particularly to higher-risk destinations or during uncertain times (for example, pandemics or political unrest).

Disadvantages of travel insurance

• Cost – premiums can be expensive, especially for comprehensive plans or for travellers with pre-existing conditions

• Complex policies – coverage varies widely between providers and plans; understanding what is included and excluded requires careful review

• Claim process – filing claims can be time-consuming, and reimbursement is not always guaranteed.

What are refundable rates?

Refundable rates are hotel, airline or other travel bookings that allow you to cancel or amend your reservation without incurring a penalty, typically up to a specified deadline.

Although these rates are usually more expensive than non-refundable options, they offer greater flexibility if your travel plans change unexpectedly.

Advantages of booking refundable rates

• Greater flexibility – you can cancel or modify your booking without financial penalty, which is particularly useful when plans are uncertain, or if situations change

• No complicated claims – unlike travel insurance, refundable bookings don’t require dealing with policy terms or lengthy claims processes

• Direct control – travellers can easily manage their bookings themselves, either through the original booking platform or the airline/hotel’s customer service.

Disadvantages of booking refundable rates

• Higher costs – refundable rates usually have higher upfront costs compared with non-refundable options, which may be significantly cheaper

• Availability – refundable options may be limited or may not always be available for all dates or destinations

• No additional coverage – refundable bookings do not cover unexpected events outside the scope of cancellation, such as medical emergencies or lost baggage.

We can break things down further to compare the two strategies.

Cost effectiveness

Travel insurance: although it involves an additional expense, insurance can be cost effective if you encounter significant issues, such as a cancelled trip or medical emergency. It’s especially beneficial for expensive trips or destinations with higher risks.

Refundable rates: paying extra for refundable bookings can be economical if you anticipate the possibility of changing plans. However, for trips with stable schedules, non-refundable rates can save money.

Scope of coverage

Travel insurance: offers broad coverage beyond just trip cancellation – for example, medical, baggage and emergency services – providing comprehensive protection.

Refundable rates: only address the financial aspect of cancellations and changes; they do not cover non-refundable expenses if you cannot travel due to unforeseen circumstances.

Flexibility

Travel insurance: provides peace of mind, but also relies on claims processes and policy terms; realisation of benefits depends on the legitimacy of claims.

Refundable rates: offer direct control over bookings, allowing immediate cancellation or modification without penalty, making them ideal for uncertain plans.

Situational suitability

Travel insurance: best suited for international travel, trips with high upfront costs, or travel to destinations with higher health or safety risks.

Refundable rates: ideal for trips with uncertain schedules, during times of unpredictable weather or when personal reasons might prompt changes to your plans.

Honestly, I don’t think there is one right or wrong answer to this question. Travel insurance and refundable rates are both valuable tools for managing travel uncertainties.

Insurance offers broad protection against a wide array of risks, providing peace of mind during unpredictable times. Refundable bookings provide direct control and flexibility for changing plans without financial penalties.

Combining both approaches can often deliver the most comprehensive safeguards, especially for complex or expensive trips.

At the end of the day, travellers should assess their individual needs, trip details and risk tolerance to determine the most suitable strategy for them. If you do decide to go the travel insurance route, my research indicates that our local insurance companies in Bermuda offer it.

• Carla Seely has 25 years of experience in the international financial services, wealth management and insurance industries. During her career, she has obtained several investment licences through the Canadian Securities Institute. She holds the ACSI certification through the Chartered Institute for Securities and Investments (UK), the QAFP designation through FP Canada, and the AINS designation through The Institutes. She also holds an MSc in Business and Management from the University of Essex