Consider risks, what's covered by trip insurance
Trip cancellation/interruption insurance is designed to reimburse you for financial losses incurred when you are forced to cancel a trip before departure or to interrupt it somewhere along the way. All such policies are "bundled" with multiple benefits, such as invaluable emergency medical expenses and transportation, to insure against potentially significant as well as relatively manageable losses.
TCI insurance is indispensable for protecting substantial, nonrefundable prepaid sums, not covered by any other type of insurance. Buy only the coverage you need, but don't leave home without it. All insurance, whether medical, homeowner, automobile or other, should be purchased with the intent to protect against major losses, not to cover minor claims that the insured can afford to absorb.
Keep in mind that TCI coverage varies widely but in general an insurance carrier will not reimburse your cancellation expenses for change of mind, unexpected business obligations, pre-existing medical conditions, failure to obtain required travel documents, carrier-caused delays or prohibition or regulation by any governmental authority.
Review all coverage and exclusion clauses in your TCI policy before purchasing and consider the following:
RISK FACTOR: Cruises, package tours, consolidator air tickets and charter flights usually require big deposits and final payments far in advance of departure. Operators' stringent cancellation clauses often provide for a partial forfeiture of deposits and paid balances if you cancel within 120 days of departure and up to 100 percent penalty for cancellations within zero to 45 days of departure. Most economy air tickets for leisure travel are nonrefundable from the get-go, although major airlines allow a partial credit to be applied against a future flight. Factor in the possibility of a travel provider's default or bankruptcy in an uncertain economic clime.
COVERAGE: Most polices will reimburse you for nonrefundable trip payments in these situations:
• Illness/injury/death — Coverage here protects the insured traveler and one or more traveling companions. In addition, policies cover cancellation or interruption of your trip because of illness, injury, or death of a close family member who remained at home. Several policies extend to a business partner at home or to a member of a traveling companion's family. The policies may not reimburse you if your trip is canceled because of a medical problem that existed within a specified time before you bought the policy. Many insurers now waive this exemption, under certain limitations, if policy is purchased within a specified period of paying trip deposit.
• Operator failure — If a travel agency, tour operator, cruise line or airline collapses, TCI will reimburse you for the prepaid cost of unusable trip arrangements. Ensure that the operator-failure provision of your TCI covers for "failure" or "default," not "bankruptcy," as an operator can fail without ever filing legally for bankruptcy. Determine that your specific travel providers are covered by the policy. All insurers state exclusions regarding financial default of a cruise line, tour operator or other entity that sold you the insurance.
• Unavoidable circumstance at home — Many TCI policies cover you against a wide range of unexpected situations at home that might require you to cancel or interrupt a trip. Among them are your residence "made uninhabitable" by fire, flood, or other disaster; a summons to jury duty or court appearance; loss of employment; a flight missed because of accident en route to airport; and other covered reasons that vary by insurer.
• Destination disasters — Most TCI policies also protect you against a number of unexpected problems at your destination or while traveling between destinations. Coverage might include plane hijacking, catastrophic natural disaster, unannounced strike, terrorist incident, or contagious disease quarantine.
REIMBURSEMENT: In general, TCI payments are designed to supplement operator refunds in order to make you financially whole from your trip outlay.
• Cancellation — If you must cancel a trip prior to departure because of covered causes, TCI payments are limited to the nonrefundable portion of deposits, prepayments, or other eligible expenses. The insurance carrier pays only the difference between what you have paid and what you recover.
• Interruption — Again, payoffs supplement what you recover from your airline, cruise line, tour operator or other travel supplier. If something goes wrong during your trip for a covered reason, TCI policies pay the extra costs of alternative transportation to rejoin your trip at a later date or for a return flight home if you must abandon your travel itinerary.
COST OF TCI POLICY: Although prices vary widely among insurers for comprehensive coverage including medical/emergency assistance, expect to pay for age-rated policies (in increments from infant to over 85 years) between 4 and 25 percent of the insured cost of your journey.
HOW MUCH PROTECTION: The determining factor regarding the amount of TCI you should purchase is the sum you will not recover — or cannot bear to forfeit either financially or emotionally — if your trip is canceled or interrupted for covered reasons. Bottom line: Buy enough TCI protection to make yourself reasonably whole in the event of loss, but not a dollar more.
SOURCES: Check out these three well-reputed Web sites to compare and purchase desired coverage offered by multiple insurers: www.squaremouth.com 800-240-0369; www.insuremytrip.com, 800-487-4722; and www.worldtravelcenter.com, 866-979-6753.
Irene Croft Jr. of Kailua, Kona, is a travel writer.