That is the question. There is no solid answer. Nevertheless, here are a few considerations and suggestions to take into account.
Insuring a trip makes the most sense for folks spending a LOT of money on their vacation. People taking cruises, for example, would be out thousands of dollars if their flight is delayed, preventing them from catching their ship on time.
For the no-budget traveler, however, trip insurance probably doesn’t make a whole lot of sense. If you’re traveling on the fly, it’s not hard to change plans, reschedule things, or cancel. You haven’t likely laid out even hundreds of dollars on plane or train tickets that can’t be refunded.
If you’re traveling with someone who has, however — such as if a friend or relative is flying across an ocean to meet up with you — it may make sense for one of you to purchase coverage, as the likelihood of something going wrong, someone getting sick, what have you increases with each person traveling. Most policies will cover the costs for the person who couldn’t travel if their partner continues on without them or will cover the cancellation fees for arrangements already made. Additionally, many of them offer assistance in case of lost or stolen luggage, which can wreak havoc for your travel partner.
What always ALWAYS makes sense is some form of emergency medical coverage (god forbid you are run over by a Vespa in Italy, break your arm or have an allergic reaction to something) in case something goes horribly wrong. You generally choose the deductible you’re willing to pay and the maximum amount of coverage you’d like, add in your age and the length of your trip and pay based on those variables. While you will hopefully never need to use it, it is far better to pay $100 and the deductible you’ve chosen rather than thousands of dollars in medical fees were something to happen. If you are traveling somewhere with substandard medical care, this is all the more important — transport to Germany or Europe from wherever (for you, your doctor and your travel partner) adds dramatically to the cost in serious medical emergencies.
If you receive emergency medical care during your travels, you will likely have to pay up front for services rendered and submit receipts to your insurance company upon your return. The hospital I visited in Belgium gladly accepted credit card payment. Some insurers require you to contact them before receiving care. Make sure your travel partner has all the necessary information so that your treatment will be reimbursed in case you are incapacitated and cannot call yourself.
Your coverage should ALWAYS include repatriation of remains. This has taken a morbid turn, I know, but international death is extremely complicated and returning your body to your loved ones is therefore a tedious and expensive process. Many of these insurance policies not only cover the costs of this (which are in the thousands), but also deal with the legal and practical details for your family.
For a great comparison of coverage, companies and costs, check out Insure My Trip.