The biggest mistake travellers make when they buy travel insurance

If you think your travel insurance policy will protect your upcoming summer holiday, you might want to take another look. Travel insurance doesn't cover everything. Truth be told, it might not cover anything.

The list of exclusions is long and includes everything from pregnancy to scuba diving. When you buy travel insurance, it's important to make sure you understand what it does - and doesn't - cover. Don't wait until the last minute to review your policy. By then, it may be too late.

Consider what happened to Jen Coburn recently when she booked a flight from San Diego to New York on American Airlines. At the end of the transaction, the airline made a high-pressure pitch for travel insurance: She was asked to choose between "protecting" her trip with insurance or leaving her trip "unprotected."

"I knew my plans might change, so I bought the insurance," says Coburn, a book publicist from San Diego.

Later, when she cancelled her plans, she discovered that she wasn't covered by the insurance. "They said that I was only covered for a ludicrously few extreme circumstances. The most laughable one was if the airline cancelled my flight," she says. "Yeah, if the airline cancels the flight, I definitely get my money back without the stupid insurance."

Airlines that sell travel insurance disclose the terms online, but they're easy to ignore. The coverage was in the fine print," Coburn concedes, "but I felt duped."

Part of the problem, says Michael McCloskey, an associate professor at Temple University's business school, is that consumers don't understand how insurance works. Most travel insurance, he says, is the "named perils" variety, which is to say it covers only what's named in the policy. But travel insurance companies often oversell the benefits when they promote their policies, promising that insurance will "protect" your vacation. In fact, travel insurance only protects what the fine print says it protects. Among the most notable exclusions:

Preexisting medical conditions: This is perhaps the biggest gotcha when it comes to exclusions. If you have a medical condition before you buy a policy, and it flares up before or during your trip, your policy may be worthless. Some insurance companies offer a waiver of the preexisting condition exclusion, but only if you buy trip insurance within a specified number of days from the date you pay your initial trip deposit. However, more insurance companies are now offering coverage for preexisting conditions, says PK Rao, president of INF Visitor Care, a travel insurance firm. "As preexisting conditions like high blood pressure and diabetes become more prevalent, there's more demand for coverage," he says.

Pregnancy: Childbirth typically isn't covered as a travel insurance medical benefit. Some travel insurance companies offer plans that cover pregnancy-related complications, but they're limited to 26 weeks' gestation and have lower dollar amounts than typical medical-emergency coverage. The bottom line is, if you're travelling while pregnant, don't count on traditional travel insurance to pay for pregnancy-related care.