Originally Posted by You
I was wondering is Travel Insurance worth the extra money if 5 people are going on a cruise, including 2 children. Thanks for your help.
, an insurance policy is always a losing bet. From the revenue that an insurance company receives in premiums, it must (1) pay the apportioned salaries and benefits of the staff who handle the policies (recording, processing claims, etc.), (2) settle all claims, (3) cover an apportioned share of its overhead expenses (management, office space, office equipment and supplies, postage, etc.), and (4) generate a profit for its shareholders. Over the long term, what you will receive in claims will be a small fraction of what you will pay in premiums. In fact, you'll get more back from a state lottery, which pays out about $0.40 per dollar spent on tickets.
So fundamentally, it does not make sense to purchase insuance to cover a loss that you can absorb. And anybody who cannot absorb a loss equal to the cost of a vacation cannot afford that vacation.
There is one situation in which insurance does
make sense, and in fact is necessary. We all need to buy insurance to protect ourselves against losses that we legitimately cannot afford. It makes sense to buy insurance policies that will cover major medical expenses, replacement of our homes in event of destruction, liability for damage or injury caused by accidents in which we are at fault, etc., because few of us could absorb those losses on our own.
And in the latter category, we also should have insurance that will cover emergency medical care or medical evacuation when we are travelling abroad because, again, many of us cannot afford such an expense.
But to insure the trip itself? No way!