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What Does Travel Cancellation Insurance Cover?

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Travelers may ignore purchasing travel cancellation insurance when offered during booking because of the cost. However, before you decline, are you aware of what travel cancellation insurance covers? It might end up saving you a substantial amount of money if something goes wrong with your trip.

Travel Cancellation Insurance Coverage

Travel cancellation insurance is designed to recoup the costs of a trip that otherwise would be non-refundable. Typically, travel cancellation insurance will reimburse you for the cost of your planned trip, including airfare, car rentals, cruises, hotels and other pre-booking expenses like theme park fees, event tickets and more.

Understand Your Policy's Coverage and Exclusions

Tyson Wharton, a travel agent who owns Sioux Empire Travel states that, "Just like regular insurance, there are different types and dealers. Every policy and company has its own unique restrictions." Generally most policies will cover your costs. Your policy might cover the following situations:

  • If your trip is cancelled due to weather incidents, natural disasters, terrorism, or restrictions that may arise over travel to certain countries by the U.S. State Department or Centers for Disease Control.
  • If you have a medical problem or injury or due to the death of a close family member.
  • If you suffer economic hardship, such as losing your job, or if your work schedule requires you to be home.
  • If you have a valid reason you cannot travel, such as being required to show up for jury duty or military service.
  • If the company you book your travel with falls apart and files for bankruptcy, thereby cancelling your trip without refunding you.

Note that some plans will cover 100% of your costs while others will provide you with a maximum dollar benefit per person. Cancellation will also usually require proof of the reason, such as a death certificate for a death in the family or a note from a licensed medical doctor if there was an illness.

What Does Travel Insurance Cover During a Trip?

Travel insurance can also cover you after you have already embarked on your trip. Examples include:

  • If anything happens during your trip, such as lost or delayed baggage, it will cover the cost of your property, and some policies will also cover the cost of buying items such as personal hygiene products and clothes to replace the ones you lost.
  • If a delayed flight that disrupts your trip and causes you to have to pay for additional costs, such as extra hotel nights, travel insurance will reimburse you for this.
  • If you need assistance, most travel cancellation insurance plans have 24/7 staff who can help you with things like finding services in another country and translating services.

What Is Not Covered by Travel Cancellation Insurance?

Not all policies have wide criteria for allowing you to cancel a trip. If, for example, you book a trip in a foreign country and learn that there is political upheaval and feel nervous traveling, some policies may not cover you if you decide to cancel. Some policies may also not cover you for things where there is a known event, such as a predicted hurricane or a pandemic like COVID-19, as you knowingly booked your travel with these potential problems in mind.

Travel insurance policy document

Cancel for Any Reasons Travel Cancellation Insurance

Cancel for Any Reason (CFAR) insurance is a policy that will allow you to cancel for any reason at all. For example, in the previous example of booking a trip where you know there will be a pandemic or natural disaster, a CFAR policy would allow you to cancel and have your costs covered. They also, says Tyson, "will still have a list of reasons you can and can't cancel and depending on how you book it with and how you book it, you will have to show proof. For example, if you book your own insurance, and a death occurred, you will need to provide a death certificate." However, he advises that if your travel agent booked the insurance, "I can just go in and cancel the trip" and the client will not need to do anything else.

CFAR and CFAR Plus Policies

Tyson also advises clients to look into the difference between CFAR and CFAR "plus" policies, which are more expensive. A CFAR plus policy, "will refund the money right to your credit card," whereas many regular CFAR policies will "give you a voucher for the company you booked the trip with, and you have a certain amount of time to use that voucher." Tyson also reports that many CFAR policies are changing in light of the issues surrounding the COVID-19 epidemic. "I've had several emails from travel insurance companies stating they are not doing CFAR any more, or they are changing how they run their CFAR policies."

Cancel for Any Reason Restrictions for Booking

CFAR policies tend to have more criteria for purchase than regular policies. Generally these criteria specify that:

  • Your policy must cover 100% of the costs of your total trip that are non-refundable.
  • You must buy the policy within a short time of paying for the trip which is usually between 10 and 21 days.
  • You must cancel your trip within a short time frame of the actual trip date, which can be anywhere from 48 to 72 hours before.

CFAR policies also often will not reimburse you for 100% of your costs, but usually run in the range of 50 to 75% of your total.

When Should You Consider Getting Travel Cancellation Insurance?

Travel cancellation insurance is not always a good investment, but there's situations where purchasing it can recoup your investment on a trip.

  • If you are traveling internationally, travel cancellation insurance, as well as travel medical insurance, are wise investments.
  • Cruises in particular are a situation where travel cancellation insurance is useful, due to their expense, potential for problems and international locations.
  • A CFAR policy is a good option when you expect that something might happen to disrupt your trip for any reason. This can be something as terrible as a pandemic, or something more benign like weather. Tyson relates the story of a client who booked a scuba diving trip and cancelled due to reports a few days prior of constant rainy weather. They received a voucher and re-booked the trip for a few weeks later when the weather forecast was perfect.
  • Another reason is if you expect that someone in your family might become ill, as Tyson notes he has had clients with older parents who bought travel insurance to cover cancelling a trip if they needed to cancel to stay home and care for them. CFAR policies "cost the most, but it covers the most things for you" and is the best option if you have any uncertainty about your trip.

On the other hand, there are times where travel insurance is a "nice to have" but is probably not worth the additional cost.

  • If you're traveling within the United States, travel cancellation insurance may not be worth it, unless your trip is fairly expensive.
  • If you already receive travel insurance through your job, bank or credit card company, an additional policy may not be worth it.
  • If your only cost is for airfare, travel insurance is not worth it unless you cancel. Otherwise, if the flight is cancelled or delayed by the airline, you should be covered under their policies for compensation and re-booking.

How to Find a Travel Cancellation Insurance Policy

Travel cancellation insurance plans can be offered at the time you book a flight, car rental, or cruise by the travel company. You can also purchase travel cancellation insurance through your travel agent. Many travel insurance companies will also sell you a policy directly through their company, which can be done through their website or by calling in. Some top travel insurance companies are:

  • Allianz Global Assistance offers limited and comprehensive travel insurance plans.
  • Amex Assurance offers coverage for trip cancellation, medical, and baggage loss, or delay.
  • Generali Global Assistance offers standard, preferred, and premium plans for travelers with different budgets and needs.
  • Seven Corners offers cancellation and medical insurance plans, as well as plans for students and frequent travelers.
  • Travelex offers two comprehensive plans for travelers which can also be customized.
  • Travel Guard offers a series of plans based on your budget and type of travel, as well as an annual plan for frequent travelers.

There are also websites that allow you to compare and contrast plans based on their policies and pricing, such as InsureMyTrip and SquareMouth.

Protect Your Investment With Travel Cancellation Insurance

Travel insurance is an excellent way to protect your financial investment in a business trip or vacation. Tyson says, "the world is an uncertain place and you never know what will happen before a trip, which is what I tell my clients about the importance of purchasing travel insurance." The more you intend to spend upfront before you travel, the better insurance will be able to protect you from financial loss if something unexpected and unfortunate happens. It's important to review your policy prior to purchasing to be sure you're aware of what is covered and what's excluded.

What Does Travel Cancellation Insurance Cover?