You’ve Covered “Medical” Insurance—Now What About “Cancellation”?

If there is anything positive to be said about how travellers have been impacted by COVID, it’s that trip cancellation insurance has become a “top of the mind” issue.

For Canadians that’s critical, because though more than 70 per cent of travellers normally buy emergency out-of-country medical coverage, fewer than a third have, up to now, considered trip cancellation/interruption insurance a necessity.

No longer. With millions of the world’s travellers now lining up for refunds or rebates for cancelled air travel, cruises, or tour packages due to COVID, the focus has shifted to gaining some assurance that family finances are also protected in case of unexpected disruption.

Fortunately, there is no shortage of trip cancellation/interruption products in the travel insurance marketplace, but understanding the conditions of coverage, the limitations and exclusions, and how and when one goes about getting a “refund” when travel plans go awry is part of the purchase process. It means reading the policy.

For example, virtually all cancellation plans offered in Canada (and there are many comprehensive plans that blend medical and cancellation coverage together) list the conditions or situations that are covered by the cancellation benefit (e.g., sudden illness of the traveller or traveller’s companion, death in the family, loss of job, call to jury duty, etc.). These are usually clearly stated in the policy. Not all cancellations qualify for a benefit. But if the cancellation is the result of some unspecified cause—such as a pandemic—then the travel supplier (airline, cruise ship, tour operator) who has already been paid a deposit or full fare is responsible for the rebate. The insurer still remains responsible for covering other listed benefits such as the costs of returning home if the passenger has already started their trip, trip delays, missed connections, or other associated incidentals like stay-over hotels or meals, but not fees already sitting in the providers’ accounts that are recoverable by either refunds or travel vouchers. The point is to avoid double dipping.

As one insurer explains in its trip cancellation policy:The benefits payable, as described in this Certificate, are in excess of all other potential sources of recovery, including alternative or replacement travel options offered by airlines, tour operators, cruise lines and other travel suppliers and other insurance coverage (even where such other coverage is described as excess) and will only become available after all other sources are exhausted.”

So when is a refund not a refund?

COVID has put this issue into focus. Both airlines and cruise operators affected by COVID cancellations initially offered vouchers for future travel, which are generally considered payment in kind. Cruise lines upped the ante by offering hefty bonuses—some up to 150 per cent of the original ticket value—to keep their passengers locked in for cruise itineraries well into 2021 even 2022. But under pressure by the US and EU governments, most lines have relented and are now offering passengers their choice of cash rebates or enhanced travel voucher packages. Interestingly, many cruisers are opting for the voucher packages. Cruisers are a very committed lot.

US and EU governments have also ordered airlines to issue cash rebates to cancelled-out travellers, though there are widespread reports that some airlines—under intense cash flow pressures—are dragging their feet in processing the refunds. The Canadian government has not yet taken that step but Air Canada is offering refunds for trips cancelled because of COVID, but only for itineraries originating in the European Union, not for flights originating in Canada.

Trip cancellation/interruption insurance is becoming increasingly important as the costs of travel become more expensive and as travel itself becomes more integral to our lives. And as with any policy, it should be carefully read, understood, and preferably discussed with the agent selling the product—not filed away to be thought about another day.

© Copyright 2020 Milan Korcok. All rights reserved.

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