Getting around the gotchas – Travel Insurance Terms

This week’s article continues last week’s discussion of some of the gotchas of travel protection…

Travel Protection Clauses and Requirements

Last week I wrote about travel insurance and my personal example of how pre-existing conditions work. I’m continuing the discussion of travel protection as there are a few more key requirements that most people aren’t aware of.

Because you buy travel insurance to protect you from unforeseen situations, you want to ensure that you meet all the requirements that may be relevant to the various clauses in the plan.

One that is easy to miss, or dismiss, is the requirement that all non-refundable travel costs be covered. What does that mean? It can vary with travel insurance companies so always verify with the specific company, but in general, it means any pre-paid cost or cancellation penalty you would owe if you cancelled your trip on departure day.

Sample plan contract clause requirement: You insure 100% of the Prepaid Trip costs that are subject to cancellation penalties or restrictions and also insure within 21 days of the Payment or Deposit for those Travel Arrangements the cost of any subsequent Travel Arrangements (or any other Travel Arrangements not made through Your travel agent) added to Your Trip.

If you have a pre-paid hotel reservation that is fully non-refundable, you would need to include that total amount in your coverage total. On the other hand, if you have a pre-paid hotel reservation that has a cancellation fee of 1-night, you would only need to ensure the amount equal to one night’s stay. And if you have reservation with a penalty that becomes effective once you are on your trip, since there wouldn’t be a cancellation fee on your trip departure day, you don’t have to include this hotel cost in your coverage.

The key point is that it is important to understand the cancellation policies of any arrangements you make, whether cruise, tour, hotel, transfer or local tour, and to ensure you include all applicable cancellation fees in your travel protection coverage amount.

Now here is the big item I want to focus on, and that is: when they say 100% of your non-refundable costs, they mean it. I’ve seen folks add up all the non-refundable costs of the trip for a total of $6,007, and then they say they will insure $6,000, and absorb the extra $7 if they need to file a claim. Except their claim will be denied if it’s for a pre-existing condition since the full amount of non-refundable costs wasn’t covered. That’s a big Gotcha!

So, it’s important to accurately calculate all the cancellation fees and non-refundable costs, and make sure you purchase insurance to cover 100% of those costs.