Pricier policies, often costing 50 percent more, offer a "cancel for any reason" provision, which means your reason doesn't have to be listed in the policy. It will reimburse you for a large portion of your trip, 75 percent to 90 percent.
The second type of coverage, arguably the most important because it protects against additional expenses that could be catastrophic, applies if you become sick or injured during travel — maybe you have to be flown home from a foreign country.
Indeed, medical expenses and medical evacuation — different things — are especially important if you're traveling abroad and your regular health insurance doesn't cover you. Only about half of health policies provide medical coverage abroad, Grace said.
Notably, Medicare without supplemental coverage does not cover you outside the United States.
"When I travel, I always get medical, and then I look at my trip costs and see what's at risk," Grace said.
The third type of coverage is travel assistance, which is a concierge service.
It can help you find doctors or contact family members in case of an emergency, for example. It's a throw-in benefit with most package policies and doesn't boost the cost much, Grace said.
Typically, travel insurance is bought per trip, but some frequent travelers buy an annual policy.
How much does it cost? Trip insurance costs, on average, 4 to 8 percent of the cost of the trip. The price is based on coverages chosen, the age of the traveler and cost of the trip.
What's the biggest warning about trip insurance? Know what a policy covers before you buy it. Only scenarios specifically listed in the policy are covered. And there are exclusions. For example, if your problem arose because you were reckless or drunk, your claim is likely to be denied. Call an insurer or broker to talk out your concerns to make sure you get the proper policy, Grace said.
What's the main argument for buying trip insurance? If you're traveling outside the country, emergency medical and evacuation coverage is probably a good idea, assuming you're not otherwise covered. "It could be a $2,000 ambulance trip or it could be a $150,000 (medical) flight from China to the U.S.," Grace said.