Having to cancel a long-anticipated vacation is bad enough. Canceling it and losing the money you had laid out for it is rubbing salt into the wound.
That’s the position travelers can find themselves in if they have to back out at the last minute. But losing your vacation doesn’t have to mean losing money. With trip-cancellation insurance, you can often get a refund of trip prepayments or deposits.
How they work. Trip-cancellation insurance (also called trip interruption, or trip cancellation and interruption) is the most common travel coverage. Typically, the policies cover you if you’re injured or ill and have to cancel a trip. You’ll also be covered if you have to cancel your trip because of the illness, injury or death of a traveling companion or immediate family member.
Policies are usually sold based on a flat rate for every $100 of coverage-ordinarily $5 to $7 for each $100. (See accompanying story.) The insurance will reimburse you only for money you cannot get back otherwise. For example, if you cancel a trip or flight and are able to get a partial refund from an airline or travel-related company, the policy will cover the difference between the refund and the remaining amount that you paid.
Similarly, it doesn’t pay to insure yourself for more than the amount you’ll have at risk, because any reimbursements under these policies cannot exceed the amount of money you actually lose. With this kind of coverage, over-insuring never pays.
Improvements on waivers. It’s important to understand the difference between trip-cancellation insurance and waiver policies. A waiver policy only “waives” the tour operator’s cancellation penalties, and probably won’t do you any good if you have to leave a trip after it has begun. It also won’t cover you for any additional costs you incur when leaving a vacation in mid-trip.
Waiver policies also can carry some strict limitations. It’s not unusual for a cruise waiver policy, for example, to apply only up until 72 hours before the departure time.
A trip-cancellation policy, on the other hand, can also cover you even if you only miss out on part of your vacation. A good policy will provide for a prorated reimbursement on the unused and otherwise non-refundable portion of a trip that you have to leave early (this is the “trip interruption” aspect of the policy), and can even cover the cost of a one-way economy class plane ticket back home.
Popular with cruises. Because of its relatively high cost, trip cancellation insurance is most often used to cover big-ticket trips: cruises and guided tours that require a significant cash outlay up front.
But as attractive as the policies can be, you’ll still have to shop carefully and read the fine print before buying, especially if you’re worried about a relative who is in poor health. In fact, understanding what’s covered under these policies can be more complicated than understanding an ordinary comprehensive health or life insurance policy.
The reason: Ordinary policies are based on the health and well-being of you alone; these travel policies depend also on the health of those closest to you. So, for example, Mutual of Omaha’s policy won’t cover you if you cancel your trip because of an illness for which you’d received medical advice, consultation or treatment (excluding prescription drugs) within 60 days before buying the policy. And the policy also won’t cover a cancellation because of an injury or illness to a family member if that person is treated for the illness within 60 days of the policy’s effective date. So this policy won’t do you any good if what you’re worried about is having to cancel a trip because of the illness of a relative who has had to visit the doctor regularly.
`CANCEL-FOR-NO-REASON’ CLAUSE
Virtually all trip-cancellation policies require that you have a good reason-usually medical-for canceling a trip. One exception: Travel Guard International, which allows cancellation for any reason.
The company will pay half of the penalty waiver, up to a maximum of $400, if you exercise the “cancel-for-no-reason” clause in the policy. Not the best deal, but better than nothing. (It will cover all costs on cancellations resulting from death or covered illnesses or injuries.)
CARRIERS, COSTS OF COVERAGE
Here is a list of companies offering Trip Cancellation & Interruption Insurance, with an example of the cost of a $2,000 policy. ( Contact individual companies for details on specific policies.)
Travel Guard International. 800-826-1300. Cost for coverage of $2,000 trip: $160.
Access America. 800-654-1908. Cost for coverage of $2,000 trip: $109.50.
Carefree Travel Insurance. 800-323-3149. Cost for coverage of $2,000 trip: $110.
American Express Travel Protection Plan. 800-234-0375. Cost for coverage of $2,000 trip: $100.
Mutual of Omaha. 800-228-9792. Cost for coverage of $2,000 trip: $130.
