TRAVEL INSURANCE
In years past, I never bothered with this before for any trip, short or long. Reason being that I rarely was in a position to have put up a large amount of money in reservations (flight, hotel, tours, etc) that could be lost in the event the trip was cancelled or delayed. And I just never worried about the off chance that I would get sick or injured. Both have at times hampered my trips, but in the end I was never confronted with a cost or inconvenience that warranted the help of insurance.
For a trip of this magnitude, however, I felt that too much risk was on the table, and, more importantly, COVID happened. Travel insurance consists ideally of two basic parts:
1) Health insurance - Consists of emergency care, assistance with care referral, and transport to places better suited for emergency treatment (both normal transport such as flights back to your home country, and emergency evacuation from areas without treatment facilities). Note that normally, travel health insurance does NOT include routine doctor, dentist, or vision specialist visits.
2) Delay/cancellation insurance - This ideally pays for money lost due to transport issues such as lost flights, hotel reservations that you are unable to use, and lost or damaged luggage and personal effects.
Of these two, the only one I really considered important was the health insurance part. With three people, including an eight year old, the risk of something going wrong increases significantly. And the potential cost of resolving the problem could also be significant.
The more likely scenario, that of travel delay or cancellation losses, could also be expensive. However, in many of these cases, the issue can be brought up with the airline or hotel, possibly with better results. I’ve yet to completely lose the money spent on all but one flight because of delay or cancellation (the exception was a US domestic flight on Frontier). It can be a fight, but ultimately most airlines are responsible enough to help you out. It helps that I am never delinquent in arriving at the airport, or forget what day my flight is. As for hotel or tour reservations, it would take a lot of cancellations to become financially burdensome. Mind you, I didn’t pre-pay a huge trip for April 2020 when everything shut down globally, nor did I pre-pay for a three week tour in the Ukraine in March 2022. Those outliers can always happen, and if you are planning for absolute worst-case scenarios, then travel insurance is a must even for a short trip.
I have singled out COVID only for the reason of how it has affected entry requirements. I am writing this in March 2022, a time when, one by one, countries are relaxing entry restrictions. However, there are lingering requirements due to the pandemic, one of which is that travel health insurance is sometimes required for entry. Not only that, but the insurance must specifically include illness due to Covid-19. Thailand even requires a minimum dollar amount of coverage to that end. For my purposes, probably the most important benefit of having travel health insurance is the letter that came with mine. It states that my family is covered for the effects of Covid-19 in the same way it covers any other emergency illness. In 2020 there was a time period where travel insurance would not cover Covid-19 at all, which may be why it remains a sticky point for entry.
Keep in mind that many travel insurance policies separate out certain countries in tiered price brackets, and some policies will NOT include certain countries at all. You may have to hunt for this info, but safe to say that likely Iran, North Korea, and Syria will fall outside the geographic validity of the insurance. But I’ve noticed other odd country exceptions on some policies (Cuba, Venezuela, Saudi Arabia, etc). As for the tiered price brackets, basically if your travel includes the USA for any length of time, the price goes way up. Some policies understand that you might be transiting the US and give a limited time validity period (like 15 days) without bumping the price.
Options for what travel insurance to acquire is limited by the length of the trip. All the policies I reviewed provided coverage up to about 60 days, but after that, the field narrows. Many are not designed for long term travel, being designed for a typical summer vacation. Others are longer term, but assume that you are returning home periodically from multiple short trips. For my purposes, the insurance had to cover a minimum of a year, with the option to extend. Some companies that provide this length of coverage are:
https://www.worldnomads.com/usa/travel-insurance
There are many companies out there, but besides the issue of coverage length, some policies cover only certain nationalities, and may emphasize some aspects of coverage at the expense of others. Unfortunately there is no short cut to knowing how to compare them, you just have to read through a lot of policy descriptions. I found opinion pages almost useless in getting ‘real customer’ feedback. Everyone is happy with cheap and quickly acquired insurance if they never have to use it. But if they are forced to use it and the process is slow and/or onerous, they invariably trash the company in every corner of the internet. None of the above companies, plus many others I looked at, were significantly better treated than others. Perhaps the only lesson I took from this was that if you make a claim, have every conceivable bit of paperwork ready, and expect to wait a long time for an answer.
HOME HEALTH INSURANCE
This part is very particular to the reader’s home country. The research and decisions I have made only really apply to US citizens, and even then, my situation is specific to the State of California. From reading about people in the UK and parts of the EU dealing with this, I am aware that there are very different options available to them that do not exist for me.
Obviously, if you are going on a trip only for a few weeks or months, you would retain your home health insurance plan. In my case, lack of a company-sponsored plan (due to leaving the job) means that I would need to purchase private health insurance. And this insurance would not be useful to me outside of the US. So why bother? Well, US tax filers are obligated to show health insurance coverage for the entire tax year, or pay a penalty. Because I don’t like the idea of paying a four-figure penalty, I decided to get around this problem another way. Here are a few solutions I considered:
SOLUTION 1 - Use the medical portion of the travel insurance policy as evidence of health insurance.
RESULT 1 - NOPE. Turns out that no travel health insurance policy, as least any that I researched, counts as ‘minimum health coverage’ as per PPACA (Patient Protection and Affordable Care Act) requirements.
SOLUTION 2 - Use a tax exclusion criteria to remove me from having to pay taxes in the first place, hence having to show health insurance coverage. How would this be possible, you ask? In short, if any US taxpayer is outside the US for a minimum of 330 days per year and has no residence or rental property etc, they are not required to pay taxes. This is called the Physical Presence Test. The ‘year’ can be shifted around to obtain the maximum absence, if the taxpayer is gone for more than a year (the IRS instructions are actually quite useful in giving examples of how to do this).
RESULT 2 - NOPE. The guidelines for health insurance coverage are not as flexible as those of the Physical Presence Test. For federal taxes, those 330 days must occur all in the same calendar year. In my particular case, leaving the US on April 1 would mean that I have already spent 90 days in the country for 2022, hence cannot ‘opt out’ of proving health insurance. To add insult to injury, California residency is even more restrictive, stating that in no case does absence from the state preclude having to prove health insurance coverage. So, even if I got out of the Federal penalty, I would still have to pay a California State penalty. I have not researched other US states, but I suspect that restrictions vary.
I should note that there is, in theory, another tax exclusion option, called the Bona Fide Residence Test. This requires that the Federal taxpayer demonstrate that they are working full time outside the US as an expatriate. But for the purposes of pure travel, this would be near impossible to ‘prove’. Not having researched this, I do not know how it might help with state tax requirements.
SOLUTION 3 - Look for a way to get an individual policy that both gives health coverage for the short amount of time you may be in the US before/after the trip during any calendar year, and isn’t more burdensome than paying tax penalties.
RESULT 3 - YEP. This turned out to not be as bad as I had feared. I have obtained private health insurance in past years, when we did not have access to any company plan, and it was always very expensive. However, the ACA does give discounted rates for low income levels. Since my only employment during this trip is whatever I generate from my consultancy, my only reportable income is from the W-2 I generate for myself. So trick #1 is deciding what is the minimum I can pay myself to stay within a low income tax bracket, hence qualify for a plan under Covered California. And trick #2 is proving this to the state, through proof of reduced income (letters confirming loss of employment) or other forms of income attestation. In our case, three of the four jobs my wife and I held were terminated, leading to a significant reduction in yearly earnings, all relatively easy to demonstrate with the appropriate paperwork. For this process to run smoothly, it helps to leave the job(s) a month or more before travel. That way a clear ‘life changing event’ can be demonstrated in a timely manner, and insurance options can be researched before all the last minute panic sets in.