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Make Sure You Get the Right Travel Insurance

Another travel columnist recently reported on a reader who decided to cancel a trip to Egypt because of the unrest in Cairo but couldn’t recover the lost costs through travel insurance. The company stonewalled the claim: Our travel insurance covers terrorism, but the uprising in Egypt wasn’t terrorism. This story and many like it give pause to any travelers trying to protect trip payments:

“Even if I buy travel insurance, how can I make sure I won’t have to hassle with the issuing company if I have to make a claim?”

The short answer is, “Buy any-reason cancellation insurance, primary medical, and buy it as soon as you start making deposits.” Buying that way greatly reduces the chances that you’ll have to argue with the insurance company if something goes wrong.

Cancel for Any Reason

I’ve frequently covered the need for trip cancellation insurance (TCI). Any time you have a lot of nonrefundable advance payments, you probably need TCI. If you have to cancel a trip after you’ve paid, TCI refunds any deposits and prepayments you can’t recover from your suppliers. Although you can retain the value of many airline tickets – even nonrefundables – you stand to lose a bundle if you have to cancel a cruise, package tour, vacation rental, all-inclusive resort package, or such. Fees and penalties are especially onerous if you have to cancel shortly before departure, where you stand to lose much if not all of your payments. Unless they’re so small that you could comfortably walk away from them, you need TCI.

Probably the biggest single source of problems with TCI is hassling about whether a trip was canceled for a “covered reason.” TCI policies contain a laundry list of “covered reasons” or “named perils” as reasons for cancellation. And if your reason isn’t on that list, your claim will be denied.

If you, a traveling companion, or family member suffers an accident or falls ill, TCI usually works. But many TCI contracts don’t cover other situations when you might want to cancel. Insurance bean counters can pick nits pretty well when they’re working on a claim they could possibly deny:

  • Most don’t cover work-related cancellations: Your boss needs you for a special project, or because someone else in your office quit, or your client reschedules a meeting, or you didn’t finish that “must do” project.
  • Most don’t cover cancellations just because something happens – at home or at your destination – that makes you want to re-think the trip. Although many allow you to cancel if your hotel has actually been hit by a hurricane, for example, they typically don’t pay as long as the hotel is open, regardless of the condition of the pool, tennis courts, or golf course. Although many allow you to cancel if your destination suffers an actual terrorist attack, they won’t cover you if the local situation just looks risky to you.
  • The solution is simple: You can avoid any hassles over contract terms with a TCI policy that allows you to cancel for any reason – even if the Cubs wind up in a World Series or the 49ers make the Super Bowl.

Any-reason TCI has been around for only about five years, and until recently you could get it from only one or two companies. Lately, however, most major travel insurance issuers have started issuing it. Recovery varies from 50 percent to 100 percent of your prepayments – the higher the percentage, the higher the cost. Usually, it’s an extra-cost add-on, but a few gold-plated policies include it.

As an example, I checked a test trip of two weeks in Europe in mid-June, for a couple ages 52 and 54, with $4,400 in nonrefundable payments. Adding 100 percent no-reason coverage to a low-cost TravelSafe “Elements” policy adds $84 to the base price of $188. At the other end of the scale, Global Alert‘s top-of-the-line “Preferred Plus” policy, at $419, includes any-reason TCI in the base price. In general, any-reason TCI requires that you buy full coverage within a few days of the time you make your first payment, and most policies also impose a cutoff date.

Don’t Mess With Pre-existing Conditions

Most travel health and evacuation policies exclude pre-existing medical conditions as a “covered reason” for paying on a claim. A pre-existing condition means any injury, sickness or condition for which medical advice, diagnosis, care or treatment was recommended or received within a specified time period ending on your date of departure – typically 90 days or 180 days. Conditions are not considered pre-existing if the condition for which prescribed drugs or medicine is taken remains controlled without any change in the required prescription.

Whether or not a condition was pre-existing is a major bone of contention in benefits claims. Companies can deny a claim for as little as a doctor’s advice to “take two aspirin and call me in the morning.”

Fortunately, you have an easy solution. Many companies waive their pre-existing conditions exclusion if you buy a policy, for the full value of nonrefundable prepayments, within a week or two (depending on the company) after your first payments.

Avoid “Pay Now, Argue Later” Medical

Most travel medical policies provide secondary coverage only. Even though most regular medical insurance covers you when you’re traveling, if you require medical or hospital services outside the U.S. you must usually pay the bill up front and claim reimbursement later. Because foreign medical institutions typically demand immediate payment, you may have to come up with a really big cash outlay or credit card hit on the spot. Moreover, paying first – then claiming – can lead to some serious disagreements about whether you followed all your policy’s necessary guidelines. That’s why I recommend primary medical insurance. That way, the insurance carrier gets involved immediately, dealing directly with doctors and hospitals. You can completely stay out of the payment process.

Primary medical is a bit more of a problem than any-reason TCI. Two companies –Travel Guard and Travelex – sell mainly policies that include primary medical in the base rate, and a few others add it as an extra-cost option. Fortunately, Travel Guard and Travelex offer competitive prices and coverages on TCI, as well, so you can probably find a policy that meets your needs.

Buying Guide

TCI is generally available only in policies bundled with medical coverage and a bunch of less important benefits. And prices depend on your age, where you’re traveling, how long your trip will be, how far in advance you pay, and sometimes the state in which you live. That’s why I can’t identify any single “best buy” recommendations.

On my sample trip, the best buy would probably be a Travelex “Lite” policy with a base price of $272, including primary medical plus $132 for 95 percent any-reason TCI recovery. But other options may be better for different trips and different travelers. As usual, I recommend you compare policies through one or more of the big online travel insurance agencies:

Reminder: You have to buy the insurance early to make sure you get the full benefits. Typically, that means buying within a week or so of the time you make your first deposit and buying coverage for the total value of your nonrefundables. If you wait, you’ll lose any-reason cancellation and the exemption for pre-existing medical conditions.

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