Look for Loopholes in Trip Cancellation Insurance

Trip cancellation is a standard feature in most travel insurance policies that are sold. But before you put down money to safeguard that $10,000 Mediterranean cruise for next year, or your trip to Paris in April, read the fine print. The promise of trip cancellation is not always what it appears.

Recently I was asked to comment on the case of a Canadian couple denied trip cancellation benefits because the husband’s mother—a cancer patient—took a sudden turn for the worse just before they were scheduled to travel, and died three days later. The couple wrote to Ellen Roseman, a financial/consumer affairs columnist with the Toronto Star, for advice, and she passed the query on to me. (You can see more of Ms. Roseman’s columns by clicking here.)

I had to inform Ellen and the aggrieved couple that their policy had what many others do—an exclusion for any cancellation caused by the illness or death of a relative with an unstable pre-existing condition. What that means is: If the cause of the cancellation (i.e., the death of the traveller’s mother) is precipitated by a medical condition that is under treatment or otherwise “unstable” prior to the traveller’s purchase of insurance, the traveller is out of luck in claiming reimbursement for the cancelled trip.

Everybody knows that a pre-existing condition in the traveller can be reason for denial of benefits—but a pre-existing condition in the traveller’s relatives, friends, business partners? Yup. It’s there. I can see the reason for it, if I try hard enough. But my biggest beef is that the exclusion is hardly ever explained to the traveller by the agent selling the policy—and, in fact, there are many agents who know nothing about that contingency in the first place.

I always tell insurance purchasers that they should read the fine print, but even I had a hard time finding that specific clause in several policies I researched. Had I not known about the loophole beforehand, I don’t think I would have found the actual wording. It’s just buried too deeply in the fine print.

There are many reasons for cancelling trips and virtually all policies have cancellation benefits, but in many cases the reimbursement is not 100 per cent of what you paid for the trip or hotel reservation, and often the payoff shrinks as you get closer to the date of travel. There are also stipulations on what qualifies as a cancellable event. Fortunately there are now increasing numbers of “Cancel for Any Reason” or “Change of Mind” policies that are much more liberal in allowing reimbursement of cancellations. However, all have some exclusions, so clean your reading glasses. The best idea is to deal with an agent or company that specializes in travel insurance, and please, ask tough questions. Don’t assume anything. Ask to be shown the contract’s language before you put down any money.

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