Tag: Life insurance

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Life insurance

Why Everyone Needs a Life Insurance Policy

The Takeaways

  1. Life Insurance is better called “death insurance” for most cases because it covers the death of a policyholder and pay the coverage to the beneficiaries.
  2. Life insurance is the most altruistic insurance of all — to the extent that insurers will pay the beneficiaries rather than policyholders.
  3. Not everyone is altruistic, which is why not everyone will buy life insurance, especially if they do not a close family relationships.
  4. The need for long term cares changes everything. Unlike other needs for life insurance, buying long term care insurance is entirely for the policyholders themselves. Given the prevalence of health care needs at senior ages, nobody is safe without the coverage. Another even bigger driver is the cost of long term cares.
  5. You can buy a standalone long term care insurance or add a long term care rider to a life insurance policy. For most people, the latter is a better choice because a standalone policy is “use it or lose it” without accumulated cash value, while a life policy with a LTC rider allows death benefits to beneficiaries even if it turns out that you have no need for long term care.  

Why Do We Want to Buy Life Insurance?

Why would anyone buy a life insurance policy? This is the question I have asked myself lately.

Do not take the question for granted, nor think it’s a no-brainer. After all, life insurance is not what the name may sound like: to insure one’s life. Life is full of risks and nobody can guarantee your life for even a short period of time like one year, let alone your whole life.

This is why many celebrities insure their body parts like voice, legs, hands, or feet? Even for those parts insurers will not guarantee the integrity and functioning of the parts, only compensate their losses.  

Sometimes I tell myself that “life insurance” is a misnomer, and for the majority of life insurance policies, a more accurate name should be “death insurance,” because they cover your death event more than anything else, and the main beneficiaries are not you but your loved ones. In that sense, life insurance is the most altruistic or benevolent policy of all types. You really need to have a big heart to buy it.

Life Insurance for Final Expenses

I used to be with a life insurance marketing company that sells nothing but final expenses, meaning the only reason someone buying the policy and pay premium for it is that at the end of their lives their “final expenses” in life, such as the funeral, the cemetery site, and the cost related to cremation, will all be taken care of by the insurance company.

The fact that a firm is selling nothing else but final expenses shows a solid market demand for this type of policy. Apparently for some people, that’s the only reason for them to buy life insurance.

But there are several things to be noticed on final expenses. First of all, strictly speaking, final expense is not exactly nor entirely altruistic because the policyholders are mainly concerned about their dead bodies more than others.

Secondly, not everyone is willing to pay money today for something remotely in the future. For one thing, this is not one of the “hard needs” or “must haves” to consider, unlike foods, water and air. For high net worth individuals, final expenses are too small a portion of the money they leave behind, and are automatically included in their estate. But for those “have nots” it is too little for the beneficiaries. For example, would anyone buy a final expense policy when they still have mortgage outstanding?

Finally, we often hear stories that parents or grandparents decided to leave properties to the youth but then quietly used some of the money that is supposed to be passed down in its entirety to next generation. The truth is that gifts and inheritances are promises but as humans we may or may not be good at keeping the promises.

How Long Term Care Changes Everything

Buying life insurance to cover the need for long term cares makes perfect sense for two reasons: the need for cares and the cost of cares.

Let’s look at the need first. According to the Centers for Disease Control and Prevention (CDC), 70% of people who turn 65 years old will need some form of long-term care services and supports in their remaining years. That is almost 3 out of every 4 seniors, although the length and level of long-term care vary from person to person and often change over time. For example, women tend to need care longer than men, with women staying in long-term care facilities for an average of 3.7 years and men for 2.2 years.  

CDC also gives the following percentages for people aged 65 or above:

  1. Percent of adult day services center participants: 63.3% in 2020.
  2. Percent of hospice patients: 94.8% in 2017.
  3. Percent of nursing home residents: 83.1% in 2018.
  4. Percent of inpatient rehabilitation facility patients: 87.9% in 2017.
  5. Percent of long-term care hospital patients: 74.3% in 2017.
  6. Percent of residential care community residents: 94.2% in 2020.

Now consider the cost of long term cares. According to the Administration for Community Living, the average cost for long-term care in a nursing home is $225 a day, which amounts to $6,824 per month for a semi-private room and $7,698 per month for a private room.

Guess what, for an average American, she or he will spend more money during their final stage of lives than they made. According to the Bureau of Labor Statistics, the average salary across the entire country in the first quarter of 2020 was $49,764 per year, which breaks down to $957 per week and $191.4 per working day.

Savings and Retirement Money May Not Cut It

Relying on your savings and retirement money is not a smart idea because it may not cut it for long term care costs. Notice Medicaid, a government program for low income individuals and families, requires meeting a low income threshold. Another government program, Medicare that covers people who are 65 or older, as well as some people under 65 with certain disabilities or conditions, only cover short term, not long term care needs.

This leaves two viable options for most if not all Americans: Buying long term care related insurance and buying life insurance with a long term care (LTC) rider.

Standalone LTC Insurance

When we talk about long term care insurance, this is what they have in mind: A special type of insurance policy that is designed specifically for LTC.

Long-term care insurance is an optional (unlike auto) insurance product that reimburses the policy owner for costs associated with long-term care. It is purchased before it is needed, with the knowledge that many older adults eventually need long-term care. Long-term care is expensive and isn’t covered by traditional health insurance or Medicare.

Long-term care insurance typically has an elimination period lasting 30 to 90 days at the beginning of the care period. This means if you buy a policy today, you will have to wait for at least 30 days, maybe even 90 days, before the insurance begins to cover your need of LTC. The covered person pays for the care during this period, and the insurance company evaluates medical records to determine if the person qualifies for reimbursement for long-term care. If the person qualifies, they can file a claim with the insurance company.

There are two types of long-term care insurance policies: traditional long-term care insurance and hybrid long-term care insurance. Traditional long-term care insurance is becoming less common due to high costs. Hybrid long-term care insurance combines long-term care insurance with life insurance or an annuity. Hybrid policies are more expensive than traditional policies but offer more flexibility.

Long-term care insurance is not cheap, and not everyone can buy a policy. Long-term care insurance companies won’t sell coverage to people already in long-term care or having trouble with activities of daily living. Private savings, Medicaid, annuities, and other insurance can also help pay for long-term care.

One of the most important features of standalone LTC policy is that it accumulate no cash value, so you must use it or lose it.  

Life Insurance with LTC Rider

This is the option I would personally recommend. A long-term care rider is just a normal life insurance policy. You will receive death benefit when you die, but before that, you can receive a portion of the death benefit while you’re still alive, if the policyholder is unable to perform at least two of the six Activities of Daily Living (ADLs), they can access the long-term care benefit via the LTC rider. The monthly allowed amounts vary but could range from 1% to 4% of the policy’s death benefit.

The LTC life insurance rider allows you to combine your life insurance benefit and long-term care needs.

It is important to note the followings. First of all, while standalone long-term care insurance policies were more prevalent in the market, they’re now rare and can be expensive. More people opt for the rider option.

Secondly, you want to buy a permanent life insurance, not term life policy. The latter does not have cash value accumulated over time, it works exactly like standalone LTC insurance in the sense that if you don’t use it, you lose it. For example, if you buy a 15 year term life at the age of 30, and by the end of the 15 years when you are 45, you are still healthy and alive, you get nothing back from the policy.

On the other hand, if you buy a permanent or whole life, you pay premium over time and the money will be divided into death benefit and cash value. A permanent life policy will not be “using it or losing it” because the death benefit and cash value are stored like in a bank’s checking /savings account. They stay under your name — unless you prematurely used them up.

Finally, when you buy a permanent life insurance policy with a long-term care rider. You pay a bit extra above and beyond the life insurance premium. Long-term care riders pay either by reimbursement or cash indemnity.

A reimbursement policy means you collect the receipts from everything you’ve spent on long-term care, home health aides, occupational therapists, nursing homes, etc. You submit them to the insurance company, and you get reimbursed.

A cash indemnity policy means you get a set amount of money each month, regardless of how much you spend on long-term care. Some insurers are better than others. For example, Equitable life insurance, which has a partnership with Farmers, allows the insured to hire anyone you like to take care of you, whether your family members, your neighbors, friends or colleagues.

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Did You Know? Life insurance

Insurance for Properties & Protecting Life

The Takeaways:

  1. Property insurance and life insurance are two major categories with different purposes, for different people, and covering different things.
  2. A trend of late is to see property insurance rate moving up, while real life insurance rate going down.
  3. One important but little known way of predicting insurance cost is to look at reinsurance cost insurance firms pay to reinsurance company.
  4. More competition, advanced technology for underwriting, increased life expectancy, better risk management and more informed consumers, these all contribute to a lower cost of life policies.

Property Insurance vs. Life Insurance: An Overview

Did you know one way to divide insurance business is to separate them into property insurance and life insurance? Yes that’s true and property and life insurances make up the biggest categories, in addition to a few other “biggies” like commercial insurance, liability insurance and health insurance.

Property insurance is about protecting physical assets (e.g., personal homes and personal belongings, businesses building and business properties, vehicles) against financial losses from covered perils (i.e., direct causes of loss that your insurer will pay you for) like fire, theft, weather damage and natural disasters. They differ from life insurance in two ways: What they cover and for whom. Simply put, (1) property insurance is always protecting properties while life insurance is always protecting loss of human lives; and (2) property insurance is always designed for property owners, while life insurance is mostly designed for the loved ones of the policyholder, occasionally for the policyholder themselves.

Note property and property insurance are not always the same. It is easy to think of property insurance as for autos and homes. After all, for most families the biggest asset is the house. But insurance terminology does not always work that way. Strictly speaking property insurance does not cover everything related to your house or autos. Remember property insurance only protects property owners? That means whenever your insurance pays money to someone else, that part of coverage belongs to liability insurance, not property insurance.

Consider an easy example: Say you were driving under influence, and you hit Joe’s car, your auto insurance will pay Joe for his bodily injury and his car damage. That money received by Joe is not strictly from your property insurance but rather your liability insurance, even though the same (comprehensive) auto policy of yours will cover both.

Life insurance, on the other hand, protects financial loss caused by the loss of human lives, not physical properties. While property insurance protects property owner(s), life insurance mostly protects others — your loved ones — although it can protect oneself (i.e., the policyholder, see more details below).

Because life insurance mostly protect your loved ones, “death benefits” is a big term that appears in all life insurance policies. This is for a good reason: Death benefits often are the biggest chunk of insurance payment. It is called death benefits because they must be paid after the policyholder is dead, only to beneficiaries (i.e., recipients of insurance payment).

But death benefits are not the only benefits in a life insurance policy. Sometimes we can receive “living benefits” that are unique in two ways: They are paid to policyholders themselves rather than to their loved ones, and they are paid when policyholders are still alive.

This is a topic for another day, and I will not get into details in this post. What I will say is a quick fact that term life insurance can have living benefit as well, contrary to a misconception some may have. For example, a terminal illness rider is typically included automatically on term life policies, providing a lump sum payment if the policyholder is diagnosed with a terminal illness and has a life expectancy of 12 months or less.

Insurance vs Reinsurance

One of the reliable ways for predicting how much premium you and I will pay for our insurance policies is to look at reinsurance cost for the insurance companies like in this report of January 2023.

Many if not most of us have never heard the word “reinsurance” before, or have but did not bother to dig deeper into it. It sounds more complicated than insurance and yet seems to be one of those things that we can afford to ignore in our lives.

In truth, reinsurance has lot to do with how much you and I will pay for our insurance premium. Let me explain. Reinsurance is simply insurance of the insurances, and only insurers or insurance companies can and will buy it, not individuals. That said, the way it works is the same: We pay premiums to the insurers for the right to receive insurance payment in case we have financial loss due to the agreed perils or direct causes of loss. Insurers also pay premium to a reinsurance company so that if during catastrophic events there are more claims than the insurers can pay, they will ask reinsurer to pay it.

Reinsurance is especially important for catastrophes like earthquakes, hurricanes, floods, wildfires, and volcanic eruptions. Human-caused catastrophes can include industrial accidents, terrorist attacks, wars, and pandemics.

Catastrophes could be disasters for any particular individuals, businesses and governments alike. But they are especially bad news for insurance companies as they bring significant financial losses for insurance companies that are unable to cover the costs of claims made by policyholders.

Insurance industry has a quantitative threshold for an event to be designated a catastrophe “when claims are expected to reach a certain dollar threshold, currently set at $25 million, and more than a certain number of policyholders and insurance companies are affected.” According to this article by Triple-I.  

You probably think insurance companies all have a deep pocket that can survive any catastrophes with no problem paying insurance claims. In truth, some insurance companies are pretty vulnerable to disasters, which is why you often hear the news that some insurers got themselves into insolvency, meaning they run out of money to pay the claims from their policyholders or clients.

By buying reinsurance, insurance companies transfer some of the risk they have taken on by insuring their customers to another insurer.

From Reinsurance Cost to Insurance Cost

Here is what ChatGPT has to say about how reinsurance premium is related to our own insurance premium to be paid to our insurer.

“Yes, generally higher reinsurance costs can lead to higher insurance premiums for customers… When reinsurance costs are higher, it means that the insurance company is paying more to transfer its risk to another company. To make up for this added cost, the insurance company may pass on the cost to customers in the form of higher insurance premiums.”

Of course, there are many factors that can affect insurance premiums, like the level of risk being insured, the insurer’s expenses, and competition in the insurance market. But reinsurance cost is one of the major factors because it is the cost for the insurers to do business, which is always significant just like in any other business.

But how does reinsurance firm determine how much it will charge insurers? It is not much different from how an insurer determines our premium. The key factors are risks involved, past frequency and severity of claims made, plus industry trends and the overall cost of risk across insurers, allowing reinsurers to set more accurate prices for their coverage.

ChatGPT tells us the following: “If reinsurance rates are high, it may indicate that reinsurers are pricing their coverage more cautiously, which suggests that the overall cost of risk in the insurance market is high. This can lead insurance companies to increase the premiums they charge customers to compensate for the increased cost of risk.”

“Overall, while reinsurance rates are not the only factor that insurance companies consider when setting premiums, they can be a useful indicator of the overall cost of risk in the insurance market and may play a role in determining the prices that customers ultimately pay for insurance coverage.”

Property Insurance Rate Goes Up, Real Life Insurance Rate Down

ChatGPT tells us the following that “it appears that property insurance rates are indeed on the rise in the US. A report by Gallagher Re shows that property catastrophe reinsurance rates for loss-hit US accounts increased by between 45% and 100% at Jan. 1 renewals, indicating a significant increase in rates for property insurance policies in some areas. This trend of increasing property insurance rates is also supported by a recent analysis by Bankrate.com, which found that the average homeowner spends about 1.91% of their household income on home insurance, a figure that has been rising over time.”

This report in Business Insurance cites a report from Amwins Group Inc as saying: “Property markets will remain hard with no softening in the foreseeable future.” “Due to the challenges in the property market, however, reinsurers are being ‘extremely cautious’ with all their capacity.” The reason for property insurance market getting tough is “the combined effects of a major hurricane making U.S. landfall in five out of the last six years, wildfires engulfing thousands of acres, unprecedented winter storms and Midwest flooding. All ‘have played a major role in hardening the insurance marketplace.’”

What about life insurance premium? ChatGPT tells us that the trend of premiums for life insurance policies has remained relatively stable in recent years. This may not sound exciting but wait for taking inflation into account: Life insurance prices remained relatively the same throughout 2021 despite inflation and an increase in death claims. The average monthly cost of a $250,000 policy only increased by a small amount from January 2021 to December 2021.

Combining the above I’d say the “real” (i.e., inflation adjusted) life insurance premium has gone down.

While there is no specific data provided for California, it is likely that the trend of stable premiums applies to the state as well.

It should be noted that while the cost of premiums may remain relatively stable, they can still vary depending on factors such as age, gender, and health status.

Explaining the Decreasing Real Life Insurance Cost

ChatGPT offers several reasons why life insurance rate may go down (with my edit):

  • Improved Health: One of the primary factors that influence life insurance premiums is the health of the policyholder. If you have made positive lifestyle changes that have led to improved health, such as quitting smoking or losing weight, then you may be eligible for lower premiums. Note this is an individual specific reason, although modern medical technologies can certainly benefit anyone.
  • Increased Competition: As more insurance companies enter the market, there is greater competition to offer more affordable policies. This can lead to lower prices for consumers as companies try to attract more business.
  • Lower Risk: Insurance companies base their premiums on risk factors such as age, health, and lifestyle. If these risk factors decrease over time, then insurance companies may lower their premiums accordingly.
  • Advances in Technology: With advancements in medical technology, it has become easier to diagnose and treat various illnesses. As a result, life insurance companies may be more confident in their ability to predict the life expectancy of policyholders, and this can lead to lower premiums. The other reason is the use of technology in underwriting, such as using Google Maps for homeowner policies and wearable devices for monitoring personal fitness.
  • Economic Conditions: Finally, economic conditions can also impact life insurance costs. If interest rates are low, for example, insurance companies may need to lower their premiums in order to remain competitive and attract new policyholders.
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Did You Know?

How to Protect Myself During a Trip? What Insurance Will Cover Me?

The Takeaways:

  1. There are numerous ways for your trip to go wrong. Most Americans however are likely not interested in buying trip insurance.
  2. Common reasons for saying “no” to travel insurance include safe trip before, low cost trips and saving money. Safe trip before does not mean safe trip today or tomorrow, as insurance is mostly about covering unexpected events.
  3. Travel insurance mostly protects oneself — during the trip, with coverages ranging from trip cancellation, travel medical insurance, lost or damaged baggage, emergency evacuation and travel accidents.
  4. The most unique feature of travel insurance is not necessarily low coverage payment but short duration: It ends when the trip ends, although sometimes they offer short extension. For this reason, having travel insurance is not enough for most people, as we need longer lasting and more comprehensive insurance like auto insurance, homeowner insurance and life insurance.

The Scaring News from the US Airports

Did you know that roughly 18 guns were seized every day at US airports last year? It is true according to the Transportation Security Administration (TSA) that intercepted 6,542 guns last year, which translated to roughly 18 guns per day, at airport checkpoints across the country. 

Guns are not the only thing to be worried. Today on February 23, 2023, the news says a brutal winter storm is walloping the entire country coast to coast. Flights are cancelled, highways closed, “trapped drivers in cars, knocked out power to hundreds of thousands of people and prompted the first blizzard warning in Southern California in decades — and the worst won’t be over for several days.”

The Low Prevalence of Travel Insurance

Travel insurance is not the most popular choice for most American travelers. In a survey of more than 1,200 Americans planning on traveling (during the pandemic), only 23% would definitely buy insurance and 21% might do so. 56%, the majority, had no plan to buy any travel insurance.

Insurers were still happy to see these figures because the thought was that in this particular study “most imminent travel looks to be family- and friends-oriented — and perhaps less expensive and closer to home — may account for the lack of interest in trip insurance.” 

A more recent study published by Business Insider in 2023 of 971 US adults however shows that explanation is not strong. “About 62% of travelers surveyed did not purchase travel insurance; of those travelers, 35% said their primary reason to forgo insurance was because they’d traveled before and never needed it. About 19% said they didn’t think their trip was expensive enough for insurance, and about 14% said they were trying to save money. About 13% said travel insurance never occurred to them.”

These reasons revealed the typical mindset not just on travel insurance but insurance in general.

Should We Forego Travel Insurance Because We Had Safe Trip Before?

I asked the above question to ChatGPT, and it comes back with the following:

“No, you should not forego travel insurance simply because you have had safe trips before. Even if you have been lucky in the past, unexpected events such as natural disasters, medical emergencies, and cancellations can still occur and ruin your trip. As a rule of thumb, if you are spending more than $5,000 on a trip, it is considered a big-ticket purchase, and travel insurance is recommended to protect your investment.”

I agree that “big ticket” travel plans (those above $5,000) should be covered by travel insurance, although smaller ones should as well. Remember in the earlier report about 19% said they didn’t think their trip was expensive enough for insurance? That is a myth. Short trips are associated with smaller airplanes and there can be cancellation and unexpected events just like big trips.

Considering that the travel insurance cost on average of 6% of the total travel cost, for a trip that costs $200, the travel insurance part only takes $12 from you. This differs significantly from the $300 you would have to pay for a $5,000 trip.

A Deeper Question about Insurance

There is a deeper reason for buying insurance, including travel insurance: Insurance is about unexpected events or accidents, designed to protect us from financial losses resulting from accidents, illnesses, natural disasters, and other unforeseen circumstances.

This is why you still need to buy travel insurance even though your previous trips were all safe.

Ask yourself if you can expect all future trips to be safe just because the previous trips were safe. If the answer is yes, then you don’t need to buy insurance from now on. But of course the answer has to be no, like what they say for investment: Past successes does not guarantee future success.

What about expected events? Well, most of them will NOT be covered by insurance. You know your car needs maintenance in the future, so your car insurance will not cover that. Similarly, you know you will need to replace your roof due to normal wear and tear, so your homeowner policy will not cover that.

This is not saying insurance excludes all expected events. For example, some health insurance policies may cover routine medical care or preventative services, even though these events are expected to occur. This is risk management of your insurer because routine medical checkups help reduce the loss for them — and for you.

What Do You Get from Travel Insurance

Once again from ChatGPT we have the following list:

  • Travel Medical Insurance: This type of insurance provides coverage for medical emergencies and expenses that may arise while you are traveling. It can cover things like doctor visits, hospitalization, and emergency medical transportation that’s not covered by your regular health insurance plan.
  • Trip Cancellation Insurance: This type of insurance provides coverage if you need to cancel your trip due to an unforeseen circumstance, such as a medical emergency or a natural disaster. Sometimes “cancel for any reason” is provided as well.
  • Personal Accident Insurance: This type of insurance provides coverage for accidental injury or death that occurs during your trip. This is a first-party coverage, meaning for yourself rather than for anyone else.
  • Emergency Evacuation Insurance: This type of insurance provides coverage for emergency medical evacuation if you are injured or become seriously ill while traveling and need to be transported to a medical facility. You could be taken to the nearest hospital or flown home if necessary when you’re injured, or you get sick on a trip.
  • Travel Insurance with Medical Coverage: This is a comprehensive insurance policy that combines several types of coverage, including medical coverage, trip cancellation coverage, and other travel-related coverage. It provides more extensive protection than a single policy and can be customized to fit your specific needs.

In many ways, travel insurance is like car insurance with a focus on self-protection rather than protecting “third party” or anyone else involved in an accident.

Note in addition to the above list, other coverages are possible like lost, stolen or damaged baggage & personal belongings, rental car damage and even finding a lawyer abroad.

Cancellation Insurance vs Free Hotel Night(s)

Don’t confuse trip cancellation insurance with free hotel night(s) provided by airlines. The former means you can get your booking money back even for non-refundable expenses like airfare, hotel bookings, and tours if for unexpected reasons such as illness, injury, death in the family, natural disaster, or other covered reasons you had to cancel your trip. The coverage may also apply if you have to interrupt your trip and return home early due to covered reasons.

Cancellation insurance can be purchased as a standalone policy or as part of a comprehensive travel insurance plan.

On the other hand, free hotel night(s) provided by airlines when a flight was cancelled has little to do with insurance. instead it is a benefit by some airlines to their customers who experience flight delays or cancellations due to reasons within the airline’s control, such as mechanical issues, crew scheduling, or weather. In reality, airlines do that even for reasons beyond their control, like bad weather conditions.

Travel Insurance for Foreign Trips

What about your plan for a foreign trip? I asked ChatGPT and here is what I got:

“If you are planning to travel abroad, it is important to consider purchasing travel insurance to protect yourself in case of injury or illness during your trip. Here are some types of insurance that can provide coverage for injuries sustained during a foreign trip:”

  • Travel Medical Insurance: This type of insurance provides coverage for medical expenses that you might incur while traveling abroad. It typically includes coverage for emergency medical treatment, hospitalization, emergency medical evacuation, and repatriation of remains in case of death.
  • Accidental Death and Dismemberment Insurance: This type of insurance provides coverage for accidental death or permanent disability resulting from an accident that occurs during your trip.
  • Personal Liability Insurance: This type of insurance provides coverage for damages or injuries that you might accidentally cause to others while traveling abroad.
  • Trip Cancellation Insurance: This type of insurance provides coverage for non-refundable expenses if you have to cancel your trip due to a covered reason, such as illness or injury.

As you can see, the coverage are basically the same as domestic coverages, even though the way ChatGPT presented may have created an impression that only foreign travel insurance will cover accidental death and dismemberment insurance as well as personal liability insurance. The truth is both domestic and foreign travel insurance can make those coverage available.

As the news told us earlier, death or dismemberment insurance can be even more important in this country than in foreign trips given the number of guns intercepted at the airports within this country.

Looking at the Big Picture

Do not forget the big picture in which travel insurance is just a small part, and normal and travel insurance can be related to each other.

If your “normal” liability insurance policy includes coverage for personal liability, it may cover you while you are traveling. For example, if you accidentally injured someone while on vacation or damaged someone else’s property, your liability insurance may cover those for you. However, if you are traveling internationally, your liability insurance policy may not provide coverage in certain countries or may have limited coverage.

Life insurance may be related to travel insurance as well. Some travel insurance policies may offer coverage for accidental death or dismemberment, which could be seen as a form of life insurance. Additionally, some life insurance policies may also offer travel benefits, such as emergency medical coverage while traveling abroad.

There will be overlapping between the two. That said, life insurance is a long-term insurance designed to provide financial protection to your loved ones in the event of your death, while travel insurance is designed for the traveler. Life insurance is also intended to cover a broad range of expenses, such as funeral costs, outstanding debts, and the loss of income that your loved ones would experience after your death.

It is not that travel insurance policies only pay small amounts in the event of financial loss. The payment amount for death in travel insurance for example can range from a few thousand dollars to several hundred thousand dollars, depending on the policy and the level of coverage you have chosen.

On the other hand, some small life insurance policies, especially term life insurance (those covering for a fixed number of years up to 30 years), typically have face values (i.e., the amount they will pay your beneficiaries or your loved ones) starting at around $25,000 or $50,000.

So payment amount is not crucial as one can always pick and choose the amount of payment desired for both travel and life insurance. The most important feature for travel insurance is its relatively short coverage duration. Once the trip is over then typically the coverage is over, although some travel insurance policies may have a coverage extension period that provides limited coverage for a specified number of days after the trip has ended. For this reason, we typically need both travel insurance and life insurance.