Many respectable travel writers, including some here at SmarterTravel, tend to label trip-cancellation/trip-interruption travel insurance (TCI) as either “essential” or a “total rip off.” For the most part, they come down hard on one side or another: gray areas not welcome. And that’s too bad, because TCI can be either, depending on your circumstances.
If you scan Chris Elliott’s postings of consumer complaint resolutions, you’ll quickly conclude that getting refunds on canceled travel arrangements is by far the most frequent big-dollar traveler pain point. Typically, you look for the lowest prices on just about anything (airfare, hotel, resort, cruise, tour package) and that almost always means you’ll make some nonrefundable buys. That’s no surprise; most of the cheapest deals are nonrefundable, and nobody wants to pay more than the cheapest options. And that works well for most of you, most of the time.
But every once in a while something happens that forces you to postpone or cancel a trip completely: Your father had a stroke, your spouse got called to jury duty, etc. And when you ask an airline or cruise line to refund your money, you think it’s “unfair” when they don’t. “Yes, I knew it was nonrefundable, but this problem isn’t my fault.” And, yes, Chris Elliott sometimes gets an airline or cruise line to issue a refund, anyhow, to avoid bad publicity. But for the most part, travel companies take the attitude that nonrefundable is nonrefundable.
Airlines will even let you keep the monetary value of a nonrefundable ticket, less a gargantuan change fee; most other suppliers do not. They have a complete legal right to deny a refund no matter what, and absent an ombudsman, they stonewall you every time. Even when they bend the rules, cash refunds are rare; more likely the best you can hope for is a credit toward a future trip—whether or not you want it.
TCI Covers a Lot
If you have to cancel a trip, TCI pays off whatever you can’t first recover from suppliers. In legalese, it satisfies the tort principle of making you “whole” again. But TCI is a “named peril” insurance, so it covers only those contingencies specified in the policy:
- Perils named in most TCI include just about every medical or accident circumstance you can think of, when suffered by you, your traveling companion, or even a close relative who isn’t traveling. Many policies waive their usual exclusion for pre-existing medical conditions if you buy the insurance within a week or two of your first trip payment.
- Most TCI, on the other hand, does not cover work-related cancellations and many do not cover cancellations due to pregnancy. If you want coverage for just about any contingency, you can buy “cancel for any reason” TCI.
The “Interruption” part of TCI covers problems that arise after you’ve already started your trip, including something that happens to you or your traveling companion or someone back home. It covers whatever extra costs you incur for an early return, as well as covering single supplements for your traveling companion who continues on the trip.
It’s All About the Risk
Whether TCI is essential or a waste depends almost entirely on your financial exposure. If your nonrefundable prepayments and deposits, or stiff cancellation penalties, total more money than you can comfortably walk away from should something derail your trip, TCI can be essential. My friend Don just sailed on a $12,000 cruise, paid in advance and completely nonrefundable within 30 days of sailing, and you can bet he bought TCI.
On the other hand, if you don’t have much at risk, TCI is a waste of money. My trip last year to Italy was on frequent flyer miles, with fully refundable hotel and rental car reservations, so I ignored TCI.
TCI costs 5 to 10 percent of your payment. And it usually comes in a bundle with useful medical benefits, along with coverages that are really trivial. But follow some sensible rules:
- Policies vary in the definitions of “covered” reasons, so you need to compare policies carefully.
- Avoid the “not really insurance” waivers some cruise lines and tour operators sell. These options waive the supplier’s cancellation penalties, and they’re often cheaper than real insurance. But their coverage is much narrower, and many limit your recovery to credit toward future travel rather than cash refunds.
- Prices for most policies increase with your age, so if you’re 70 or over, try to find a policy that is not age-based. If the rates are too stiff, you might even be better off taking the waiver option. It’s weaker coverage, but not usually age-rated.
- Don’t lose protection by rounding coverage down to get into a lower cost bracket. Some policies require that you insure 100 percent of the prepayment value. If you want partial coverage, find a policy that allows partial coverage.
- Don’t pay extra for low-risk contingencies such as lost baggage or flight delay. If they come with a bundle, fine, but they’re not big-dollar risks, and your credit card might cover them, anyhow.
- Buy insurance soon enough to waive the exclusion for pre-existing medical conditions.
Fortunately, the big online travel insurance agencies post websites that provide full explanations and allow easy comparisons of coverages and rates on dozens of policies from all major insurers.
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Consumer advocate Ed Perkins has been writing about travel for more than three decades. The founding editor of the Consumer Reports Travel Letter, he continues to inform travelers and fight consumer abuses every day at SmarterTravel.