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.