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Trip cancellation insurance
By Joyce Garcia, Travel Watch reporter
If Hurricane Whatsis blows through that cruise you've planned for months, will the money you spent go with it?
Even while some travel costs get cheaper -- airfare and some hotel rates come to mind -- a trip still can be a sizable investment. Cancellation insurance will cover you if that investment is threatened or needs to be shelved in an emergency.
When considering such insurance, look at two factors: the cost of the trip and situations that could force a cancellation.
If the change fee or cancellation fee on a plane ticket is about $100 -- the going rate for change fees at most major airlines -- "do you need trip cancellation insurance?" asks Brad Elman, spokesman for the Million Dollar Round Table, a financial industry group, and a life insurance specialist.
"The answer is, 'I don't think so.'"
But if the trip is a cruise or a safari, which often has a stricter policy that could make the thousands of dollars in costs nonrefundable, cancellation insurance probably is a good idea.
The more inclusive cancellation policies available will cover you if the trip must be interrupted or canceled due to the following:
- illness of you or your companion
- illness or death of a loved one back home
- severe weather
- a labor strike
- the travel provider goes bankrupt or defaults
"Most people are buying the trip cancellation insurance because they're concerned about the large expenses that they've laid out because they're not refundable," said Kim Michaels, who runs her own online agency, TheInsuranceExchange.com, out of Palmdale, California.
"Or if they miss their cruise and maybe the cruise line would be able to reschedule, but there'd be no other times they could take it."
Read the fine print
Cruise and tour companies vary widely in their cancellation and refund policies. Some don't allow passengers to cancel without paying penalties -- making them less palatable to insurers.
"There are (insurers) out there that will not work with certain cruises," Michaels said.
Comprehensive policies will bundle in basic medical costs as well as minimal coverage of evacuation -- in case you need to be taken to medical facilities from a remote location -- or even repatriation of one's remains back to the United States.
How much does it cost?
The cost for cancellation insurance usually is around 5 percent to 7 percent of the price of the vacation, according to the Insurance Information Institute, an industry group. Insurers often increase the amount of the premium according to the age of the traveler; older travelers may have to pay more.
How much of the trip cost needs to be insured? While Michaels said she used to help insure clients for out-of-pocket costs only, she said more policies nowadays require insurance for the full cost of the trip.
"I've sold policies in the past where the client calls the airline, they call the hotel, they call whatever travel supplier that they're working with and find out, 'What are your rules, your regulations, your fees?' ... Then they'd add up those dollar amounts that would truly be out of pocket, and we'd insure for that.
"Now I'm hesitant to tell people to do that, now that a lot of these policies say that you must insure for the full cost of the trip."
"The bottom line is, check the wording of the policy that you're buying," Michaels said. "If your adventure is 100 percent nonrefundable, you just simply insure for that, for the full amount."
Cancellation waivers
Some cruise lines offer a "cancellation waiver" that simply waives the company's cancellation penalty if you need to cancel before you leave. It must be purchased when you book the cruise and usually applies up to a few days before departure. It will not cover you after the trip has started.
These waivers cost about $40 to $60, according to the Insurance Information Institute.
Beware that they are not insurance and are not regulated by state insurance officials. And if the cruise company suddenly goes belly-up, you're out of luck.
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