Trip-Cancellation Insurance

Trip-Cancellation Insurance (TCI) is designed to reimburse you for the financial losses that you incur when you are required to cancel a trip before departure or interrupt it somewhere along the way. But TCI will not reimburse you if you simply change your mind about traveling.

Virtually all TCI policies are effective in the case of sudden illness, injury, or death, yours or a family member's. Also covered in most policies are cancellations due to a wide variety of "unforeseen events": your house burns down, you are summoned for jury duty, you get a flat tire on the way to the airport and miss the flight, or a travel supplier is crippled by an unannounced strike.

Don't consider it if you can accept the occasional forfeit of a modest deposit or prepayment. Nor does it make sense as protection against smaller travel risks such as on-the-spot clothing allowance if baggage is delayed. But if you've put down a large prepayment on a major trip, tour or charter — money you can't afford to lose — then TCI makes the most sense.

TIP: Don't get sucked into buying flight insurance--it's a waste of money. Statistically, you're more likely to die of a bee sting than in an airplane crash.

Risks To Your Trip
Package tours and charters usually require big deposits far in advance of departure, well before you leave. Cancellation clauses often provide for a complete forfeit if you cancel within a month or less of departure. Most consolidator tickets are also nonrefundable: you get back nothing if you don't take your trip as originally ticketed. Whatever your reason for changing travel plans, loss of prepayments is usually your most serious financial risk.

Most TCI polices will reimburse you in the following situations:

• Illness/injury/death. Coverage here protects you (the insured traveler) and one or more traveling companions. All also 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 due to a preexisting condition, a medical problem that existed within a specified time before you bought the policy. A preexisting condition is typically defined as one for which an insured person was treated by a physician or took prescribed medication. The exclusionary period can vary from 30 to 180 days.
• Operator failure. If a travel agency, tour operator or airline collapses, TCI will reimburse you for the cost of worthless airline tickets or prepaid hotel vouchers. The operator-failure provision of TCI protects you against those contingencies, but only up to a certain point. While most policies say they'll pay off in case of "failure" or "default," a few say they just protect against "bankruptcy." That's an important distinction: An operator can fail without ever filing for bankruptcy. Many TCI policies exclude failure of either the company that sold the travel service or the company that sold the insurance; a few exclude both. So if you buy TCI from a travel agency, you won't be covered if the agency fails, but you are protected against failure of a tour operator, charter operator, or airline. However, if you bypass an agency and buy your tour (plus insurance) from a tour operator, you won't be covered if that operator fails.

• Home misfortunes. Many TCI policies cover you against a wide range of unavoidable and unexpected mishaps at home that might require you to cancel or interrupt a trip. Among them: Your house is "made uninhabitable" by fire, flood, or other disaster; you're called to jury duty or a court appearance; or you miss a flight through some accident on the way to the airport.
• Destination disasters. TCI can also cover you against a long list of unexpected problems at your destination (or in any area through which you plan to pass). Among those: Your plane is hijacked; your intended destination is hit by a natural disaster such as earthquake, fire, or flood; your destination is quarantined because of a contagious disease; an unannounced strike halts air travel; or there's an outbreak of terrorism at your destination.

TCI Payoffs 
In general, TCI payments are designed to make good to you in case of a problem.

• Cancellation. If you must cancel a trip before you leave, TCI payments are limited to the nonrefundable portion of prepayments, deposits, or additional costs. If, say, sickness makes you cancel a package tour, you must ask the tour operator for any refund it may normally provide in case of illness. The insurance company pays only the difference between what you paid and what you recover.
• Interruption. Again, payoffs supplement what you recover from your airline or tour operator. If something goes wrong during your trip, or if you postpone rather than cancel your departure, TCI policies pay the extra costs of alternative transportation to rejoin your trip-an airfare, say, or a penalty to switch your air ticket to a later flight. TCI pays for "unscheduled return," a ticket home if you have to leave in mid-trip.

TIP: For many trips, there's an easy, no-cost alternative to operator-failure insurance. If you buy a tour or airline ticket with a charge card, you can get the charge removed from your account if the supplier fails to provide the service.

The Cost Of Your Policy 
Although prices vary depending upon how comprehensive you want your policy to be, for basic coverage expect to pay between $5 and $7 for every $100 worth of protection. In other words, if you buy a trip-cancellation policy worth $5,000, the onetime premium will cost $250-$350.

​How Much Protection Do You Need? 
At first glance, travelers who pay $5,000 in advance for a vacation might assume they need to buy $5,000 worth of TCI coverage. But that's not necessarily true. The determining factor is the amount of the investment you stand to lose if the trip is canceled or interrupted. For example, if you are required to pay a 25% cancellation fee (or $1,250) but are promised a refund of the balance, you need to buy TCI to cover only the $1,250 at risk.

TIP: Other insurance protects against situations where the amount of money at risk is small. That group includes insurance to cover the costs of hotel accommodations, meals, and personal care products in the event a flight is delayed. Those coverages cost too much, compared with the risk, to make sense.

Travel Insurance You May Already Have 
Before you buy additional insurance, check the protection you may already have from the following sources: Credit-card insurance. American Express automatically gives card members $100,000 worth of travel-accident insurance whenever they charge an airline, train, bus, or cruise-ship ticket to the card. Visa Gold cardholders automatically receive $150,000 worth of coverage.

Most credit cards offer car-rental insurance whenever you charge the rental to that card. This insurance is limited — it covers only damage to the rental vehicle, not medical costs or liability — but it allows you to decline safely the rental company's "collision damage" coverage. Some card issuers also routinely offer emergency worldwide medical and legal-assistance plans. Other coverage offered with certain credit cards includes a lost-baggage plan, trip-delay protection, replacement of lost or stolen items that were purchased with the card, and roadside assistance.

Homeowner's protection. Buried in the fine print of most standard homeowner's policies are several types of valuable travel coverage. In fact, whatever is scheduled for coverage at home is also protected when you take it on the road. For example, if your hotel room is burglarized, most policies will treat your losses no differently from the way they would had the theft occurred at home. Lost or stolen passports, tickets, and even cash may also be partially reimbursed.

Automobile coverage. Six out of ten car owners have automotive insurance that includes coverage of the cost of any damage you might do to a rented car. Virtually all automobile policies also cover liability to any third party injured in an accident with your rented car. In other words, almost anyone who owns a car is duplicating his coverage if he buys optional insurance packages from a car-rental firm. But beware: standard personal auto insurance is valid only in the United States and Canada; you may need special coverage if you plan on driving internationally.

Where To Find It 
Among the best-known names in the TCI field include:
Access America Service Corp: 800-284-8300
American Express: 800-234-0375
CSA Travel Protection and Assistance Services
GlobalCare: 800-821-2488
Health Care Abroad/Global: 800-237-6615, 703-687-3166
International Medical Group (IMG): 866-368-3724
Mutual of Omaha (Travel Assure): 800-228-9792
Travel Guard: 800-826-1300
Travel Insurance Services: (800) 937-1387
Travel Protect: 800-694-5921
TravMed: 800-937-1387
The Travelers: 800-243-3174
Worldwide Assistance: 800-821-2828

What About Doctor's Bills? 
If you are planning to travel extensively in remote areas or in regions where local health services may be inadequate, you may want to consider emergency medical evacuation (EME) insurance. Most people probably have year-round health policies that cover medical and hospitalization costs in foreign countries. But check to make sure your policy covers you. Those who depend on Medicare for their health insurance aren't covered overseas. Moreover, some other health policies limit coverage outside the US. Medicare supplements extend coverage overseas; others don't. If your regular policy, health maintenance organization, or Medicare supplement doesn't cover you overseas, travel insurance can fill the gap.

EME is usually bundled with TCI. But if it is not, it's available separately (or as part of a medical package) from all standard retail policies. Coverage limits vary from $20,000 to $100,000. The prices are based on length of trip (in days); for a two-week trip, you'd pay $49-60.

Specialized EME Policies 
If you need emergency medical coverage only infrequently, you can easily buy it as a supplement to TCI. But if you travel for extended periods, you may want to consider buying it from one of the several companies that specialize in EME services. Those companies maintain worldwide networks of assistance representatives. Among the companies that offer extended EME policies are Health Care Abroad/Global, TravMed, and Worldwide Assistance.