Trip Cancellation Insurance Doesn’t Cover Everything

You’ve laid out a couple of thousand dollars for a trip to Europe this winter and a family member dies, or worker protests break out in Spain, and you can’t go on your trip. Or student rioters sack your hotel in Greece, and you’ve got to cancel your return home. Are you covered? The best answer I can give you is maybe. Read your policy or call your insurer to find out for sure.

When it comes to trip cancellation insurance, the first rule is that it does NOT cover everything. The second rule? It is meant to cover only the unexpected. For example, I was recently contacted by a woman who was planning extensive travel this winter but had just learned that her father-in-law was diagnosed with a serious form of cancer and may not have much longer to live. Should she proceed with her plans, she wondered, and would she be protected if she and her husband had to quickly return should her father-in-law die?

The short answer: If his diagnosis preceded her travel purchases (hotel, tours, air, etc.)—that is, if she knew of this risk before booking—she would likely not be covered for any prepaid, non-refundable portion of her trip costs. The result would be the same if she paid for trips to Spain or Greece after her government had issued formal warnings about not travelling to certain parts of those countries.

As a general rule, if the disruptive event, or government travel warning, occurs after you have booked and paid for your trip, you would be covered “according to the terms of your policy.” And I emphasize: You need to know the terms of your policy. Trip cancellation insurance is a backstop, a refund of last resort. It does not pay out until the people who actually collected your deposits or payments in full have refused to cough up. But if you’re expecting trip cancellation insurance to protect you while travelling to a known trouble zone, forget it. Either stay home or pay as you go.

Trip cancellation insurance can be a good thing. But it has a lot of exclusions, limitations, and “maybes.” You need to know what those are.

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