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The basics of cruise insurance


We sometimes view travel insurance as a borderline scam, and some of it—notably for rental cars—is close to a scam. Cruise insurance, on the other hand, can provide a vital protection for risks that can run into thousands of dollars. But cruise insurance remains something of a mystery to some travelers. A typical reader’s question goes something like this: “What are the best options for purchasing cruise insurance? Should I buy from an independent broker or via the cruise line?” Those are both good questions, and the answers to both depend on specific circumstances. Here’s an overview of cruise insurance basics.

The risks

Cruise insurance typically covers three basic risks:

  • Loss of nonrefundable advance payments and deposits in the event that unforeseen circumstances require that you cancel a cruise. Typically, you must prepay a cruise in full, often many months in advance of sailing. Cruise lines impose refund limitations that escalate the closer you are to sailing date, often ending with 100 percent nonrefundability within the last several weeks or month. The “Trip Cancellation Insurance” (TCI) element of cruise insurance repays you for any amounts you can’t recover from the cruise line, provided you cancel for a “covered” reason.
  • Extra costs of traveling home before your scheduled return in the event you suffer an accident or illness during a cruise, or a close family member at home suffers an accident or illness. Unexpectedly cutting short your cruise to fly home—perhaps from a distant port—usually entails a severe airfare penalty. The “Trip Interruption Insurance” (TII) component of cruise insurance compensates you for whatever extra airfare you need to pay to get home early.
  • The costs of emergency medical treatment or emergency evacuation in the event you suffer illness or accident too severe to be treated by the cruise ship’s medical facilities. Your regular health insurance may or may not cover doctor visits and hospital stays outside the U.S. It probably doesn’t cover the costs in the unlikely event you need special emergency evacuation to a shore hospital or a U.S. medical facility for treatment—costs that can be astronomical. The “Medical and Evacuation” (Medevac) component of cruise insurance pays any such costs you can’t recover from your regular health insurance.

Each of these three possibilities entails a substantial financial risk—up to tens of thousands of dollars—that most of you probably couldn’t afford. That’s why you need basic cruise insurance that covers all three contingencies.

Some “gold plated” cruise insurance policies cover a handful of other contingencies, such as lost baggage, delayed flights, and such. However, the financial risks of those contingencies are much less; in my view, they don’t warrant the extra costs of a high-cost insurance policy.

Some differences

Although most cruise insurance programs cover the basics, you’ll find differences in “covered” reasons for cancellation:

  • Almost all policies allow you to cancel or return early in the event of sickness or an accident affecting you, a traveling companion, or a close family member remaining at home. Most cover outbreaks of terrorism or natural disasters at your destination area; most cover calls to jury duty, to active duty in the armed services, or court subpoena; most cover major damage to your home; many cover accidents or other mishaps on the way to/from airports or ports.
  • Most policies allow you to cancel or return early in the event of accident or illness affecting, at a minimum, spouses, parents, and children who remain at home. Some include aunts and uncles, in-laws, and other more extended members.

You can sift through specific differences when you compare policies.

Only one set of policies, however—from TravelSafe—offers options that allow you to cancel for any reason, including business reasons (not covered by any others) or even if you just don’t feel like getting out of bed. However, policies that include any-reason cancellation are more expensive than more conventional options.

Waivers or true insurance?

Cruise “insurance” comes in two basic flavors:

  • True insurance provides full TCI, TII, and Medevac coverage that extends from the time of your first deposit until you return home. Typically, you buy this type of insurance through travel agencies or third-party brokers, although some cruise lines also sell it.
  • A cancellation waiver, sold by a cruise line, waives the line’s cancellation penalties that would otherwise apply to cancellation for a covered reason. Typical waivers include only TCI, not TII or Medevac, and coverage may expire 24 to 72 hours before sailing. Cancellation waivers are usually less expensive than true insurance.

To me, the choice is a no-brainer: If you need insurance, you need all three of the basic elements. Buying a waiver rather than true insurance—just to save a few bucks—is false economy.

Where and how to buy

Where you buy depends on what you buy. If you’re satisfied with the minimal coverage of a cancellation waiver, you almost always buy that directly from the cruise line. On the other hand, if you want true insurance, you may buy it from a cruise line, a travel agency, or a third-party broker.

If your cruise line sells true insurance, use that policy as a benchmark. Read the fine print carefully, to make sure the “covered reasons” meet your needs. Also take a look at the policy your travel agency sells. Note, especially, whether a policy waives exclusions for “pre-existing medical conditions,” as most of the better policies do, as long as you buy the insurance within a week or so of the time you make your initial deposits and payments. Do not accept a policy without that waiver.

These days, the best way to buy cruise insurance is through one of the several online agencies that compare policies from different suppliers. Among those sites are 1Travelinsurance, InsureMyTrip, QuoteWright, Squaremouth, and Total Travel Insurance. All of them provide user-friendly entry forms for your trip particulars and insurance needs, then display policies and costs that meet your needs. Insurance companies underwrite the actual policies.

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