The Brancatelli File
HOW TO BUY
BY JOE BRANCATELLI
June 1, 1997 -- Your first question is simple enough: "Should I buy trip-cancellation/interruption insurance?" The answer is categorically "Yes," whenever you pay in advance for a costly cruise or a pricey tour package.
Unfortunately, that's the only categorical answer about trip-cancellation insurance (TCI). All the questions you may ask--not to mention all the questions you don't even know you should be asking--have convoluted, equivocal and sometimes conflicting, answers. TCI, admits Edmund Cocco, president of a trip-cancellation firm called GlobalCare, is "the most crucial purchase a traveler can make, but it's also the most difficult to understand."
The following primer won't answer all your questions or cover every contingency, but it does explain what most travelers should know about TCI.
WHAT TCI COVERS Trip-cancellation insurance will reimburse you for the financial losses that you incur when you are required to cancel your trip before departure or interrupt it somewhere along the way. But TCI is not about caprice. "Trip-cancellation insurance is about an event or illness you can't control that forces you to change your plans," explains an executive of one TCI firm. "If you cancel a trip because you've thought better about going, that's not covered."
READING THE FINE PRINT Many firms sell TCI policies (see below) and the fine print varies widely. For example, most TCI coverage is effective when a trip is canceled because you suffer a sudden illness or injury or a family member dies or is incapacitated. Also covered in most policies are cancellations due to "unforeseen events": Your house burns down; you are summoned for jury duty; you get a flat tire on the way to the airport and miss the flight; or a travel supplier is crippled by an unannounced strike. But only one major insurer, Travelex, will reimburse you if you cancel a trip because you lost your job.
And TCI policies differ wildly when it comes to exclusions based on pre-existing medical conditions. The exclusionary period, for instance, may be as short as 30 days or as long as 180 days. Even more perplexing is the difference between "controlled" and "uncontrolled" pre-existing conditions. Some policies will cover a pre-existing condition if it has been successfully controlled by medication, yet others will automatically exclude any condition that has required medical attention of any kind.
HOW MUCH TO BUY Travelers who pay $5,000 in advance for a vacation might assume that they need to buy $5,000 worth of trip-cancellation coverage. But that's not necessarily true. The determining factor is the amount of the investment that will be lost if the trip is canceled or interrupted. For example, if you are required to pay a nonrefundable 25 percent cancellation fee (or $1,250), but will receive a refund for the balance of a canceled trip, then you need only buy a policy to cover the $1,250 at risk.
But beware: Many tour packagers--and almost all cruise lines and adventure-travel operators--prorate their cancellation fees. The penalty gets larger as the departure date draws nearer. Within the last few weeks before a departure, in fact, you could lose everything in the event of a cancellation. In that case, since your total investment is at risk, protect yourself with a TCI policy that covers the total cost of your trip.
WHAT YOU PAY Prices vary, but TCI coverage usually costs between $6 and $8 for every $100 worth of protection. In other words, if you buy a trip-cancellation policy worth $5,000, the one-time premium will be in the range of $300 to $400.
TRIP-INTERRUPTION COVERAGE Requests for reimbursement of canceled trips outnumber trip-interruption claims by a margin of about four to one, says Beth Godlin, senior vice president of a TCI insurer called Access America. But don't ignore the details of a policy's trip-interruption clause. Be sure it pays for the full cost of a ticket should you have to make an unscheduled return home.
THE OPERATOR-FAILURE QUANDARY What happens if your trip is canceled or interrupted because a tour operator or travel agent fails or if an airline or cruise line collapses? That depends on the TCI policy and some financial semantics. Some policies cover "failure" or "default" while a few cover only a "bankruptcy." An operator can cease operations without ever declaring bankruptcy, so beware of policies that draw that legal distinction.
And be advised that every TCI policy that I examined limits its coverage to "third-party" failures. In other words, if you purchase a travel package directly from a tour operator and the operator fails to deliver, you are not covered. But use a travel agent to book the same travel package from the same tour operator and you are covered.
"It's illogical," admits Cocco of GlobalCare. "Travelers buying TCI in good faith shouldn't be forced to make that kind of distinction."
Here are some other types of travel insurance that may or may not be part of a trip-cancellation bundle you can buy. Notice how your existing insurance may cover some or all of the same issues.
MEDICAL EMERGENCIES Your personal health insurance may not cover medical, drug, and hospital costs overseas. Worse, you probably can't communicate with a doctor who doesn't speak English. And what if you need emergency medical evacuation, a service that costs $10,000 or more? Buy yourself some medical peace of mind before you travel. Firms like International SOS (800-523-8930) sell travel-medical policies that cover overseas medical costs, include assistance from English-speaking doctors anywhere around the world, and, if necessary, provide emergency evacuation. Policies that cover two weeks of travel start at $55 a person.
LOST-LUGGAGE INSURANCE An airline's maximum liability for lost luggage is $1,250 a passenger on domestic flights and about $650 a bag on international flights. But don't rush out and buy separate coverage without first checking your homeowner's or tenant's insurance policy. Lost-luggage coverage is probably included and you won't need more unless you're traveling with extremely valuable property.
COMMON-CARRIER COVERAGE Better known as "flight insurance," common-carrier or travel-accident coverage reimburses you for accidental death, dismemberment or loss of sight that results from a travel accident. Chances are you already have this insurance: Many credit cards offer it for free if you pay for your ticket with the card. Ask the financial institution that issued your card for more details.
This column originally appeared in Frommer's Travel Update.
Copyright © 1993-2005 by Joe Brancatelli. All rights reserved.