How does credit card travel insurance work?

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Even veteran travelers can be thrown off course by a delayed flight, lost luggage, illness or any number of other calamities.

If you didn't buy a travel insurance policy when you booked your plans, you could be out thousands of dollars in airfare, hotel reservations and more. But the best travel credit cards have built-in travel insurance that reimburses you for many unexpected expenses.

Here's what you need to know about credit card travel insurance, including how it works, what it covers and which cards are the best for travel insurance benefits.

If your flight is canceled, you may get a full refund from the airline. But that doesn't cover other prepaid nonrefundable costs, like hotel reservations or theater tickets. Many credit card companies reimburse for cancellations, as well as for lost luggage, for food and lodging you had to buy because of a delay, for rental car insurance and for other travel-related coverage.

You don't have to fill out an application but in almost all cases, you must have paid for your trip using the card.

In addition, most credit card travel insurance is secondary insurance: That means, for example, if your luggage is stolen, you'll have to file a claim with your homeowners insurance provider before your card company will pay out.

Trip cancellation and interruption

Trip cancellation and interruption protection help if your travels are canceled or cut short due to unforeseen circumstances, like a medical emergency or a death in the family. You may also be able to get reimbursed for expenses related to getting home, like a cab to the airport.

Read your card's policy to understand what is covered and how much you could be reimbursed.

Trip delay

Airlines aren't required to compensate passengers for a delayed flight — you might not even get a meal, depending on the cause. Trip delay insurance kicks in after a delay of a certain number of hours or if it necessitates an overnight stay. There's usually a per-day limit and a total maximum benefit per person.

Credit card trip delay coverage is secondary, which means if the airline gives you vouchers for food or a hotel, you can't file a claim with your card.

Delayed and lost baggage

Airlines are required to compensate passengers for lost luggage up to $3,800 per person for domestic flights and up to $1,700 for international flights. Many carriers exclude laptops, cameras and other valuables, however, and it's unlikely you'll be reimbursed the full value of your belongings. 

If your bags are misplaced or misrouted by the airline, baggage delay protection can cover the cost of clothes, toiletries and other items you may need in the meantime. If your baggage is delayed at least six hours, for example, Chase credit cards will reimburse you for essentials for up to $100 a day for five days.

If the airline never finds your bags, lost luggage reimbursement can cover the difference between their actual cash value and what your carrier is willing to give you. It can also pay for items that are lost or stolen elsewhere on the trip.

Rental car

Most travel rewards cards come with rental car insurance. Usually, it's secondary coverage, which means it won't kick in until after you file with your regular car insurance provider.

Just because your card covers damages to the vehicle, however, doesn't mean it will reimburse the cost of repairing another driver's vehicle. You might still want to consider full liability protection from the rental company or see if your own auto policy includes extended rental car coverage.

Travel medical and evacuation

U.S. health insurance usually isn't valid overseas, so medical coverage can help pay for a doctor's visit or hospital stay. If your card's travel insurance has evacuation coverage, it may include transport if a covered event disrupts your trip (like severe weather, medical emergency or civil unrest).

Travel medical care and emergency evacuation coverage are less common among travel cards.

Travel accident

It's not something anyone wants to think about, but people can be hurt badly or even killed on vacation. Travel accident insurance is a kind of accidental death and dismemberment policy, paying out a lump sum if you lose your sight, speech, hearing, limb or life while on a trip.

Travel accident protection is also not commonly included with credit card travel insurance but the cards we highlight here all offer it.

The best travel credit cards offer travel insurance. For frequent travelers, this can be worth an annual fee, but choose a card that works best for you.

Chase Sapphire Reserve® Card

The Chase Sapphire Reserve card offers some of the most generous travel protections of any credit card, including up to $10,000 per person and $20,000 per trip for trip cancellation or interruption. It also comes with coverage for trip delays and lost/delayed baggage.

The card also carries up to $75,000 in rental car insurance and, unlike most cards, its primary insurance. That means you don't have to file a claim with your car insurance company and risk raising your premiums.

Southwest Rapid Rewards® Plus Credit Card

The Southwest Rapid Rewards Plus Credit Card comes with trip cancellation and trip delay protection, as well as a lost luggage benefit of up to $3,000 per passenger and baggage delay insurance worth up to $100 a day for three days if your bags are delayed for more than six hours.

Its $69 annual fee is one of the lowest for travel cards that offer travel accident insurance.

Chase Ink Business Preferred® Credit Card

The Ink Business Preferred credit card comes with trip cancellation and interruption insurance for prepaid, non-refundable travel expenses. Rental car insurance with Ink Business Preferred is primary if it's for business reasons or if you're renting outside a vehicle outside of the U.S.

Platinum Card® from American Express

The Platinum Card from American Express covers *trip cancellation and interruption, lost /delayed baggage and **rental car insurance, as well as access to AmEx's 24/7 ***Premium Global Assist hotline.

If your trip is delayed at least six hours for a covered reason, you can be reimbursed for up to $500 for food, hotels and other necessities, with a maximum of two claims per 12-month period.

Bank of America® Premium Rewards® credit card

The Bank of America Premium Rewards card provides trip cancellation and interruption insurance, as well as trip delay reimbursement, lost luggage reimbursement and baggage delay coverage, emergency assistance and 24/7 roadside dispatch service.

Many travel credit cards have built-in travel protections that can help in many situations. However, there are substantial differences from getting a standalone travel insurance policy.

Cost

Your card's annual fee pays for travel insurance benefits, so there's no additional per-trip cost. A standalone travel insurance policy, on the other hand, typically costs between 4% and 8% of a trip's total value.

Coverage limits

Credit cards usually have much lower limits than standalone policies: Chase Sapphire Reserve caps payouts for travel cancellation at $10,000 per person, for example, while Allianz Travel's OneTrip Prime policy reimburses up to $100,000 per traveler.

Features

While a travel card can cover trip cancellations, delays and interruptions, a separate policy will almost always have more benefits and options for customized limits.

Many insurers offer a cancel for any reason (CFAR) add-on, for example, which lets you cancel your trip for nearly any reason — even one not otherwise covered by your policy. They may also have a waiver for pre-existing medical conditions, which credit cards lack.

Pros

• No additional per-trip cost
• Coverage is automatic with purchase
• Other travel benefits, like bonus points, free bag check and lounge access.

Cons

• Trip must be booked using your credit card
• Coverage limits are much lower than with a standalone policy
• Rarely cover traveling companions except for immediate family members
• Most cards do not cover medical treatment or emergency evacuation

If you're facing a covered loss, you should be able to file a claim on your credit card website, although it will probably be processed by a third-party insurance provider, like Allianz.

You'll need to provide documentation. Depending on the claim, that could include:

• Proof of trip delay, interruption or cancellation 
• Receipts for any expenses relating to the claim (food, cab ride, hotel stay, etc.)
• Medical bills and hospital records
• Police reports
• A loss report from the airline or other transportation provider 
• A list of what was in your luggage and its value

Here's how to file a claim with several major credit card carriers.

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Information about the Bank of America® Premium Rewards® credit card has been collected independently by CNBC Select and has not been reviewed or provided by the issuer of the card prior to publication.

*Eligibility and Benefit level varies by Card. Terms, conditions and limitations apply. Visit the American Express benefits guide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

** Eligibility and Benefit level varies by Card. Terms, conditions and limitations apply. Visit the American Express benefits guide for more details. Underwritten by AMEX Assurance Company. Car Rental Loss or Damage Coverage is offered through American Express Travel Related Services Company, Inc.

*** Eligibility and Benefit level varies by Card. Terms, conditions and limitations apply. Visit the American Express benefits guide for more details. Please visit americanexpress.com/benefitsguide for more details. If approved and coordinated by Premium Global Assist Hotline, emergency medical transportation assistance may be provided at no cost. In any other circumstance, Card Members may be responsible for the costs charged by third-party service providers.