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I have never bought travel insurance in my life because instinct has always told me that it’s a bad deal. I rarely pay for hotel rooms, tours or rental cars in advance. I don’t pack designer clothing in my checked luggage. I’m generally healthy, and I have medical insurance that covers me abroad.

But instinct is a poor way to make decisions about insurance. So with a three-week trip to Asia approaching, I finally decided to figure out whether I should be traveling with insurance, and, in general, when it is smart to have it and when is it unnecessary.

Travelers tend to buy insurance if they are more at risk or more likely than the average policyholder to make a claim. In economics that’s called “adverse selection” — but it’s adverse only for the insurance companies. For consumers, it’s just smart. Imagine two people looking at a $100 insurance policy for a two-week trip: one is a 65-year-old heading to India, where he plans to rent a scooter, eat street food and sleep in already-reserved five-star hotels every night. The other is a 30-year-old going to London, planning to crash at a friend’s apartment and buy discount theatre tickets every night. It’s pretty clear who should buy insurance.

Generally, travel insurance is sold in packages, combining various categories of coverage. Go through them all, determining what you need and what you don’t, either because you’re not at risk or you’re already covered. If a package doesn’t seem worth it, more customized policies offer certain options. But you may not end up saving that much.

Medical

If you have regular health insurance which doesn’t cover you while abroad, you need some when you travel. Medicare participants and citizens of countries covered by national health services generally fall into this category. Others should check on the specifics of their policies.

Emergency Evacuation

This one is simple: without coverage, if I have to be medically evacuated home from a distant land, I’m out something like $30,000. So it comes down to how likely the scenario is. Headed to a particularly isolated region? Climbing mountains or fording rivers? Then having evacuation coverage as part of a package or separately is a good idea.

Travel Protection

This kind of insurance offers reimbursement (sometimes partial) for prepaid reservations if your trip is cancelled, interrupted or delayed. I rarely spend much on a trip before I leave beyond the plane ticket (always coach) and maybe the first night in a hotel (always cheap). But for others, with expensive seats and long prepaid reservations, it might make sense.

Also worth noting: some credit cards will provide similar coverage.

Baggage Protection

It’s worth it to determine the value of what’s inside your baggage and do the math.

Of course, whether you get reimbursed is partly up to you. A World Nomads customer service representative gave this example: if you leave your cell phone in your bathing suit and go into the water, it’s not covered.

Accidental Death and Dismemberment

I’ve never understood this one. If you need life insurance, wouldn’t you want it for the whole year, not just when you’re traveling? And if you lose a limb, will a few grand — what World Nomads offers — really help? (Note that life insurance companies will ask about your travel habits; so be sure you’re honest when you apply — and if you already have coverage, be sure it covers the countries you’re visiting.)

So Is It Worth It?

Though my initial instinct to avoid package insurance had been (coincidentally) right, the process was valuable anyway: I now know a lot more about my medical coverage and credit card perks. Everyone should make similar calculations.

By Seth Kugel

See full story on New York Times Blog