Vacations and business travel can get expensive. One option is to purchase trip cancellation insurance. But is it worth the cost? We answer that question and provides ways to get vacation coverage for free.
People who love to be prepared for every little thing when traveling usually gravitate toward trip-cancellation insurance. Others see it as a sure way to lose a few hundred dollars. That money could have been used to upgrade to first class or stay an extra night at a luxurious hotel.
Are you potentially avoiding the loss of thousands of dollars? Or are you throwing a few hundred dollars down the drain when you invest in trip-cancellation insurance? Whether or not this type of insurance is worth the investment actually depends on a few different factors. Take a look at the pros and cons of purchasing trip-cancellation insurance for your upcoming and future adventures.
What Trip-Cancellation Insurance Typically Covers
Trip-cancellation coverage will typically reimburse you for prepaid, non-refundable travel expenses. Of course, reimbursement only occurs if you’re canceling your trip for what qualifies as a covered reason. Trip cancellation insurance usually covers you in the event of an illness or injury, weather and natural disasters, strikes, military duty and some companies will even cover you if you have passport or visa issues. Keep in mind that every policy is different, and you should read the fine print thoroughly.
Most plans offer reimbursement for some or all of the following costs:
- Airline change fees
- Mileage redeposit fees
- Hotel reservations and cancellation fees
- Cruise reservations
- Booked tours and excursions
- Ground transportation
Some trip-cancellation policies seem to cover everything under the sun. Others only reimburse you for the basics. Actual approved reimbursement items and payment maximums will vary by company. You should make your trip payments using your credit card to qualify for reimbursement if you’re receiving trip coverage through a card.
What Trip-Insurance Costs
The cost to ensure a trip will vary drastically, depending on the type of coverage, the length of your trip, the destination and the ages of every traveler. However, typically, it should cost between four and ten percent of your total trip cost.
You shouldn’t let the cost of trip insurance deter you. Instead, consider the risks for any given trip. For example, if you are traveling to the Caribbean during the height of the hurricane season, you may want to find a policy that specifically offers full coverage in the event weather-related disasters.
The Pros of Trip-Cancellation Insurance
Trip-cancellation insurance can be a real lifesaver. You paying several hundred dollars to protect against losing several thousand when you purchase cancellation insurance for an expensive trip. Purchasing cancellation coverage could be a wise move if you have a chronic condition or long-term injury that can sometimes flare up and make travel difficult, unwise or impossible. It can also give you peace of mind to know that you won’t lose the total cost of your trip if a loved one with an illness requires hospitalization or passes away right before it’s time to take off.
Trip-cancellation insurance can also protect your investment in travel expenses even if nobody gets sick. Most policies will cover you in the event that your flight is cancelled due to carrier issues or weather. In addition, you can often get reimbursed through your coverage if a natural disaster occurs where you live or at the destination you’re headed to. Trip-cancellation insurance could even save the day if jury duty or some other legal obligation springs up on you and forces you to cancel your trip.
The Cons of Trip-Cancellation Insurance
Making the decision to purchase cancellation insurance isn’t easy. It typically costs between four and eight percent of the total price of your trip. Is it really worth parting with such a big chunk of money?
The biggest con to getting cancellation insurance is how confusing the process can be. The words in the fine print can sometimes come back to haunt you when you purchase a trip-cancellation policy. Many policies have very strict rules that only allow you to be reimbursed for travel expenses under very specific circumstances. Almost all policies won’t cover you if you miss a trip due to your own fault. In other words, you shouldn’t expect to get your money back for your trip if you miss a flight because you drank too much and crashed your car on the way to the airport or you didn’t hear your alarm clock going off on the morning of your flight.
Trying to provide proof and documentation even if your reason for canceling your trip does fall within your policy’s guidelines can sometimes cause a real headache. This is why it’s at least worth looking into cancellation insurance that allows you to cancel for any reason. While this is a better option for getting peace of mind, it is obviously going to be much more expensive.
Free Trip Cancellation Insurance
What if you want to enjoy the peace of mind that goes along with knowing that you won’t be on the hook for the cost of your canceled trip without shopping around for a new policy every time you travel? Frequent travelers actually have two good options to consider. The first option is to purchase an annual policy that will cover you every time you book a trip to leave the country. One such company is Travel Insurance Direct, where you can buy travel insurance starting from today. Another company is Alianz, which can help you find the best travel insurance for your needs. This type of policy is a smart choice for frequent travelers because you’ll essentially end up paying less than you would for individual policies if you take three or more international trips per year.
The second option is to simply sign up for a credit card that offers built-in travel insurance. A card like the Barclaycard Arrival Plus World Elite Mastercard® provides reimbursement if your trip is interrupted or cancelled for a covered reason and your tickets were purchased using your card.
Do You Need Trip-Cancellation Insurance?
It’s probably worth paying a few hundred dollars if you’re booking an expensive international trip that costs more than you can realistically afford to lose. Of course, it’s important to really read the details of the policies that are available to make sure that the one you choose actually offers coverage for reasons that are likely to happen to you. People who leave the country at least three times a year are much better off purchasing annual insurance. Alternatively, they could sign up for credit cards that offer travel coverage than they are trying to make sense of individual policies every time a new trip is booked.
Updated March 21, 2018 and originally published March 13, 2018.