Psychology of Travel Insurance: What you Need to Know Before Buying

Insurance is a cozy blanket, made to warm your chilly thoughts about disasters befalling your upcoming vacation. It’s a gentle hand on your shoulder telling you everything is going to be okay, even though things are not okay. Today, we explore the psychology of travel insurance, including what you need to know before purchasing insurance for your next vacation.

So, is buying travel insurance the right decision for you? Does it really protect you from loss or is it a waste of money on something that you almost certainly won’t need? Let’s see what psychology has to say about this.

The Travel Insurance Industry

First, we need to understand the “psychology” of travel insurance businesses as well. Actuarial tables help companies set insurance coverages and price points based in part on the statistical likelihoods of these adverse events. The insurance company profits when more money is coming in from premiums than going out from the company to cover insured events. So, you better believe they take those statistics pretty darn seriously!

To use a cliche gambling metaphor, these actuarial tables are the Vegas sports book odds makers and they always seem to have the inside edge because it’s their job to predict accurately (at least, predict accurately in more cases than not).

This doesn’t make them an evil and soul-less corporation trying to suck people dry of their vacation fund. It’s a business and they genuinely do provide a service.

Different from other types of services, however, sometimes you never get to see the payoff (other than perhaps peace of mind of course!). That said, it’s good when you don’t get the insurance payoff because that means your vacation went on without a hitch! Hooray! Great vacation…but didn’t need to have bought the travel insurance.

Catastrophizing

To help understand your travel insurance decision further, some key words you’ll want to become familiar with are risk-aversion and catastrophizing. Together, these terms will help paint a picture of where you stand in how you view the need for travel insurance, and whether or not you need to reconsider your perspective on the topic.

We can all imagine a worst-case scenario in which your meticulously developed plans fall apart due to some unpredictable circumstances. Family emergencies, natural disasters, and onset of illness to name a few. These are cases where certain travel insurance plans might save your tail from losing all of your invested travel funds.

However, there’s a tendency for some people to think in a pattern called “catastrophizing”. This occurs when people persistently over-estimate the likelihood of a catastrophe occurring. It feels protective to consistently view things in a worst-case scenario because then you may feel more prepared when a worst-case scenario actually happens.

However, for all the other circumstances that don’t turn in to catastrophes (i.e., the vast majority of cases), the person may borrow stress and miss out on opportunities they would enjoy due to the fears.

So, do you tend to catastrophize? Do you get stuck in persistent fears about the possibility of worst case problems? Can you imagine how this might influence your views on needing travel insurance?

For a more in-depth view on how your thinking can impact your traveling, check out this post on Positive Psychology and travel.

Risk-Aversion

The other term to know for this discussion is called risk-aversion. Risk aversion is the degree to which you naturally tend to avoid taking risks. In other words, it’s how unsettled you feel about circumstances with greater degrees of uncertainty or potential hazard. Consider how you play the classic board game Risk…do you build up your forces defensively or do you thin your ranks to aggressively pursue your goals?

Rate yourself 1-10 in terms of how risk-averse you are. Let “1” mean you’re a dare-deviling risk-taking fanatic and “10” mean that the thought of any risk whatsoever makes you hyperventilate. So, what’s your risk aversion number?

If you’re closer to a “1”, you’re unlikely to be thinking about getting travel insurance. Those nearing “10” have already purchased the travel insurance before choosing to read this article in their ongoing effort to confirm that there is no additional risk they could mitigate.

It gets even more interesting when you’re not at one extreme or the other. Consider the risk taker that is also someone who tends to think catastrophically. They will have mixed feelings about travel insurance as they don’t mind risk but at the same time anticipate things will go so badly that you would need it.

Or opposite, consider those who are highly averse to risk but feel that nothing bad could happen. They may want insurance to limit risk but also feel that they would never need it.

Do YOU Need Travel Insurance?

By understanding how travel insurance companies set their rates, determining your degree of risk aversion, and recognizing any of your tendencies to think in catastrophic terms, it can help you make a more balanced decision regarding purchasing travel insurance.

If you’ve got plenty of funds, the choice is pretty easy to go ahead and buy travel insurance. The cost to you is inconsequential and you gain the benefits of having coverage.

However, if funds are tight, you need to think about BOTH the Pro’s and Con’s of having insurance, as well as the Pro’s and Con’s of not having insurance. Most people are used to the idea of exploring pro’s and con’s of a particular choice, but few consider the pros and con’s of the alternative.

By considering the benefits and drawbacks on each side (buying insurance versus not buying insurance), you should get a pretty good feel for what would be best for your situation.

Ultimately, the decision is one that you will need to make for yourself, but the suggestion here is that by improving your awareness of how you think about risk, it will help you judge more precisely about how much you need travel insurance.

Regardless if you choose to purchase travel insurance or not, take a deep breath and enjoy planning your vacation!

For more, sign up for the free Psychology of Travel Newsletter. Comment below with other tips for your fellow travelers!

Also, we now have an ebook available, check out the Psychology of Travel ebook here!

Happy Travels,

Dr. L
Founder, PsychologyofTravel.com

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