I’ve now read way too many stories about the recently launched AirCare travel insurance product. All of them focus on the potential huge payouts that customers might realize for flight delays or other troubles. And they all manage to ignore one key factor: It is a sucker bet. For $25/trip you can get coverage across five categories of trip interruption. Getting paid out at a level which comes close to recovering the initial investment, however, is very, very unlikely.
Here are the 5 ways you can get paid:
All those $1000 offers seem grand, right? The bad news is that your odds are better at the tables in Las Vegas than with this coverage.
You’re betting $25/trip that something bad is going to happen. And bad things do happen from time to time. But not nearly often enough for most travelers to benefit from this sort of coverage. How many flights are stuck on the tarmac more than two hours? The DoT (and AirCare) know the answer to that question and it is a tiny, tiny number. In March 2014 there were 160 flights with a 2-hour tarmac time out of 503,758 tracked but the DoT. That’s fewer than 1 of every 3000 domestic flights. Do you really think you’ve got the odds in your favor on that bet?
Lost or delayed bags are a similarly rare occurrence, though at 1/300ish more likely than the tarmac delays. Of course, the reported number of claims doesn’t account for bags being delivered within the 12 hour window which AirCare requires before a claim is paid. I’m also skeptical of instant funding of delayed or lost bag claims given that the airlines won’t typically declare a bag lost or stolen for at least 7 days.
Finally, there’s the part where comparable coverage is often available at much lower costs, possibly even free. An AmEx Gold card comes with coverage for lost or stolen bags – up to $500 coverage for checked bags and $1250 for carry-ons – assuming you buy the ticket with the card; no extra premiums are charged. The Chase Sapphire Preferred provides even better coverage, with a 6-hour threshold for delayed bags (paying $100/day up to 5 days) and flight delays over 12 hours get $500/ticket. Sure, the $50 for a 2 hour delay is likely to pay more often than the 12 hour delay, but the likelihood that you’ve actually incurred real expenses for a 2 hour delay is low relative to the longer one and the $50 payout isn’t all that great; very unlikely to be worth betting $25 on for every trip.
You’ve got a better change of winning big by picking up a stack of green chips next time you’re at the casino – one for each trip you plan to insure with AirCare – and placing them on individual numbers on the roulette wheel. The payout is about the same and the odds are much, much better.
AirCare Travel Insurance has a cute name and the promise of instant payments for small inconveniences is sexy. But it is a sucker bet. There are times where travel insurance can be a smart purchase. The scenarios covered by this plan don’t fit into any of those categories. Don’t be fooled.
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