What does trip cancellation insurance cover?

Man sitting in kitchen with digital tablet, looking up trip cancellation insuranceImage: Man sitting in kitchen with digital tablet, looking up trip cancellation insurance

In a Nutshell

If something goes wrong before your trip, trip cancellation insurance may reimburse you for some prepaid, nonrefundable expenses as well as some cancellation penalty fees. But trip cancellation insurance only covers certain situations before you leave for your trip — it’s important to understand what’s covered and what’s not with this type of travel insurance policy. 
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In light of the coronavirus, you might be wondering if you can get reimbursed for canceling a nonrefundable flight, hotel or cruise reservation.

Airlines are required to offer you a cash refund if they cancel your flight. But what happens if you cancel?

That’s when trip cancellation insurance may come in handy. This type of travel insurance can help cover nonrefundable trip costs that you’ve already paid for, along with any cancellation fees, for a covered reason.

Let’s take a look at how trip cancellation insurance works, what it covers and where you can get it.

What’s the difference between trip cancellation insurance and travel insurance?

Trip cancellation insurance is a type of travel insurance. While travel insurance may cover a range of scenarios, trip cancellation insurance is more limited in scope.

A comprehensive travel insurance plan may cover a wide variety of emergencies that could ruin your vacation, such as travel delays, trip delays, trip cancellation and interruption, medical and dental expenses, transportation to the nearest hospital, medical evacuation to a more advanced hospital that is better equipped to treat your condition, lost baggage and baggage delays.

Trip cancellation insurance coverage is more limited. As the name implies, if you need to cancel your travel plans for a covered reason, you could be reimbursed for nonrefundable expenses like flights, hotels, tour operators and cruises. Trip cancellation insurance typically kicks in after you purchase the coverage and ends on your departure date or when you cancel your trip.

In many cases, trip interruption insurance can be packaged together with trip cancellation coverage. If you have to go home early in the middle of your vacation, trip interruption coverage might reimburse you for any unused reservations that are nonrefundable and help you pay for additional transportation costs related to the interruption.

What is covered by trip cancellation insurance?

It’s important to check with your trip cancellation insurance provider before you cancel your trip, because what — and who — is covered may vary by insurer and the plan you choose. In some cases, you may need to buy some types of add-on trip insurance to cover certain situations. In general, here are some scenarios where trip cancellation insurance may come into play.

If you get sick right before vacation

As long as you bought your trip cancellation insurance before you or your travel companion got sick, you may be able to get reimbursed for your flight, hotel stay and any other nonrefundable reservations you previously made. But you’ll likely need some documentation from your doctor indicating you’re in no condition to travel.

If the government has issued a travel advisory for your destination

If you purchased your trip cancellation policy before the government issued a travel advisory against travel to your destination because of COVID-19 infection, you may be covered, depending on your insurance provider.

If you’ve been laid off

Depending on your policy, trip cancellation insurance may kick in if you or your travel companion are fired or laid off before your trip — but after you buy trip cancellation coverage.

If severe weather strikes

If a hurricane warning is issued for your destination within a certain period of time before your trip, your policy may cover your cancellation. Some of your trip expenses may also be covered if your airline or transportation carrier cancels your trip because of inclement weather or if your accommodations are ruined by a natural disaster, such as a flood or earthquake.

Here are some other times where trip cancellation coverage may kick in.

  • A close family member of either your or your traveling companion dies.
  • You or your travel companion are subpoenaed or summoned for jury duty that can’t be rescheduled.
  • Your or your covered travel companions — or your family member — are called into active military service.

Depending on your policy and provider, additional situations may be covered. Make sure you read the policy documents so you understand what may be eligible for coverage.

What may not be covered by trip cancellation insurance?

Trip cancellation insurance often comes with exclusions you should know about. Here are some examples.

If you’re afraid to travel because of COVID-19

Given the coronavirus outbreak, some people might be afraid to travel right now. Unfortunately, trip cancellation insurance may not reimburse you for losses if you cancel your trip as a precaution — unless you buy specific Trip Cancellation for Any Reason coverage. With this type of coverage, you can cancel your trip for any reason and be reimbursed up to your coverage limit. But keep in mind that some travel insurance companies aren’t selling Trip Cancellation for Any Reason coverage at this time, because of the coronavirus outbreak.

If you got sick before you bought trip cancellation coverage

Typically, travel insurance companies won’t cover preexisting conditions for you or your traveling companion. If you get sick before you buy your trip cancellation policy, you probably won’t be covered for that sickness.

A good example is the coronavirus. If you’ve contracted COVID-19, and you’re not sure whether you’ll be fully recovered before your vacation, buying trip cancellation insurance now won’t do you much good.

Known events

Your travel insurance company may not cover “known events.” Known events are those that have become foreseeable. Pandemics, epidemics, severe weather and natural disasters can all be considered known events. If you buy a trip cancellation policy after an event becomes known, your insurer may not cover situations related to that event.  

This list is by no means exhaustive. Depending on your policy and insurer, additional events may not be covered by your trip cancellation insurance.

Where can you buy trip cancellation insurance?

There are two main ways to get trip cancellation insurance.

1. Your credit card — Some credit cards offer travel benefits at no added cost that include trip cancellation insurance. Coverage through your credit card issuer may be secondary, which means your issuer will only cover amounts beyond what your transportation carrier or other insurance coverage might reimburse you.

2. Travel insurance companies — Companies that specialize in travel insurance, such as Travel Guard and Allianz Travel, typically offer trip cancellation insurance as part of their policy options.

Can you buy trip cancellation insurance after booking a trip?

You can generally buy trip cancellation insurance after you book your trip, but certain situations may not be covered if they occurred before you bought the policy. For example, a trip cancellation because of illness likely won’t be covered if you were already sick when you bought the policy. And as mentioned previously, if an event like an impending storm or a pandemic is already foreseeable when you buy the policy, scenarios tied to that event may not be covered.

Is trip cancellation insurance worth buying?

Trip cancellation insurance may be worth buying if your trip is expensive and you could potentially lose a lot of money if you were suddenly unable to travel. My rule of thumb is the more expensive the vacation is, the more important it is to have trip cancellation insurance.

But if your credit card offers trip cancellation insurance, you might not need to purchase it separately. Your travel coverage might automatically kick in once you pay for your trip expenses with the card.

If, say, you’re going to visit friends or family and your trip expenses consist only of airfare, you may not need trip cancellation insurance, either. You’re entitled to a full refund if your flight is cancelled or significantly changed by the airline, or if you buy a refundable ticket.

You may also be able to forgo trip cancellation insurance if your hotel allows for free cancellations right up until your stay.

Next steps

Buying trip cancellation insurance before you drop thousands of dollars on a big trip can be a great way to get some peace of mind in case of unforeseen events.

If you’re considering a policy or your credit card comes with this type of travel protection, make sure you read the policy documents and understand exactly what the insurer may — or may not — cover. As with any purchase, shopping around and comparing insurance benefits and rates across companies can help you find the best coverage for your needs and budget.

About the author: Tim Devaney is a personal finance writer and credit card expert at Credit Karma. He’s a longtime journalist who prides himself on being a good storyteller who can explain complex information in an easily digestible wa… Read more.