Is travel insurance stacked against you?

Dennis Devermont saved $260 on his Baltic cruise, but the decision cost him $118,000. That’s how much he paid for an air ambulance from St. Petersburg, Russia, to Los Angeles, after his colon ruptured while at sea.

“The pain was unimaginable and unrelenting,” remembers Devermont, an attorney from Santa Monica, Calif.

Devermont later discovered he could have plunked down just $260 to join an annual medical transport membership program, which would’ve covered his emergency flight home.

“I wish I’d done that. It cost me a fortune to get back,” he adds.

On later trips to Africa and Indonesia, Devermont bought a supplemental membership from a company called MedjetAssist, which he says was an easy call. Other travel choices aren’t. For example, should you go for a more expensive, flexible airline ticket or take your chances with the cheapest fare? How about car rentals: spring for the optional insurance, or skip it? These decisions ought to be no-brainers, too, but they aren’t.

Consider optional car rental insurance. It comes in several flavors and always seems to be heavily promoted at the counter when you pick up your vehicle. Most travelers would agree that having insurance is a good idea. But is that still true when it doubles the cost of your car rental?

That was the dilemma faced by Richard Sharits, who recently rented a car from Alamo in Colorado Springs. Sharits, a computer scientist from Beavercreek, Ohio, faced a dizzying array of insurance “options” when he picked up his vehicle, including collision damage waiver ($23.99 a day), “extended” protection ($13.68 a day), roadside assistance protection ($4.99 per day) and personal accident insurance/personal effects coverage ($5.50 a day). If he had purchased them all, his rate would more than doubled. No thanks, he said, instead relying on the coverage offered by his credit card and car insurance.

But after he returned the car, Alamo said he damaged the bumper, and sent him a claim form. Sharits insisted he returned the car in the same shape as he picked it up, but an Alamo spokeswoman said the claim was valid. “Photos indicate that the bumper cover is pulled away, causing a very noticeable gap — something that would not be missed,” says spokeswoman Laura Bryant.

Alamo’s policy is a little disingenuous. Had it offered a more affordable insurance product, then Sharits, like countless other car rental customers, might have chosen this “optional” coverage. So why do car rental companies force their customers to play damage-claim roulette? Because insurance is incredibly profitable. And because either way, they win.

Ditto for airline tickets. Sonia Loigman, a reader from Philadelphia, contacted me after she had to cancel her vacation to Venice, Italy. Just before her flight, Loigman’s husband was hospitalized for 10 days and had to cancel the trip. US Airways offered the couple a credit, but she, too, had to go to the hospital for surgery.

Would the airline consider a refund? No.

The Loigmans could have purchased travel insurance or full-fare tickets. That would have allowed them to cancel their flight and receive a full refund, a representative told me. And that’s true enough. But it’s also correct that the insurance sold through airline websites has lots of exclusions, which might have applied to the couple. Also, a full-fare ticket would have cost them thousands more than a regular ticket. They are, in fact, priced for business travelers who are on expense accounts. The Loigmans probably had little choice.

Why can’t airlines offer fair fares? Simple reason: they would be less profitable. You either get a bargain ticket or pay an outrageous markup. Either way, you’ll sit in the same cramped economy class seat. The economics behind such pricing decisions may make sense, but the customer service explanation doesn’t.

The solution is obvious. No company should force a customer to choose between an underpriced, unfair product and overpriced but slightly fairer one. And Devermont, who said he almost died in the Russian hospital, shouldn’t have ever been placed in that situation. His ship’s doctor should have been able to take care of him until he could be transported to a competent medical facility.

If the free market can’t fix these problems, then maybe government regulators should.

Avoiding hard choices

Buy the right insurance. A “cancel for any reason” policy is often a more cost-effective way of avoiding the high cost of a flexible fare. It’s more expensive than a standard travel insurance policy, but the cost often pales in comparison to that of a full-fare ticket. You can recover most of the cost of your trip.

Resist the upsell. Car rental employees are trained to push expensive insurance at the counter. Make sure your credit card or car insurance covers what you need, and then offer a polite “no.” To avoid a frivolous damage claim, be sure to take “before” and “after” images of your vehicle.

If you feel you’re stuck, pull out. If, at any point prior to completing a purchase, you’re made to feel as if you’re caught between two bad choices, abandon it and go elsewhere. For example, airlines such as Alaska Airlines and JetBlue offer more reasonable fares that don’t always force you to choose between low cost and flexibility.