Bankruptcy/Financial Default Coverage

This coverage provides reimbursement for your pre-paid travel costs (up to the policy limit) in the event a travel supplier ceases business operations due to financial circumstances. This is a listed covered reason under trip cancellation coverage.

Contents (click to jump down) What does Financial Default cover? Important notes about this coverage What type of policy covers this? How much coverage does each company provide? Summary

Let us tell you a story

As a child, Jill had heard her mother’s stories of taking a cruise to Alaska. As a poor college student, she had taken a backpack and sleeping bag and slept on the deck under the stars. As an adult, Jill had always wanted to take the same path with her mother, but with a little more luxury.

When Jill found a great deal on an Alaskan cruise package, she jumped at the chance. A few weeks before their schedule departure, however, they received notice that the cruise line had ceased all operations due to financial problems. Jill had purchased travel insurance protection with financial default coverage and was able to get reimbursement for her pre-paid travel costs. Instead of taking a cruise, they spent the week enjoying their hometown and vowed to reschedule the cruise for another time.

What does Financial Default cover?

Before we outline what financial default coverage covers, it’s important to understand that financial default is not the same as bankruptcy. If a travel supplier, such as an airline or cruise operator goes into bankruptcy, they may not have to cease all operations. Bankruptcy means that the company is seeking legal protection and hopes to work out their financial problems.

Financial default, on the other hand, is a complete suspension of operations due to financial circumstances regardless of whether the company has filed for bankruptcy. Some travel insurance plans include bankruptcy coverage with financial default and some do not.

With this coverage, benefits are paid if no alternative transportation can be found. If an alternative can be found, benefits will be limited to the change fee (if any) charged by the travel supplier. For example, if the original airline is in financial default, but an alternative flight can be found to get you to your destination, travel insurance will pay for the alternative flight less the change fee applied by the original airline.

Many plans that offer this coverage include a waiting period (usually 7-14 days). During the waiting period, which begins at the effective date of coverage, financial default will not be a covered reason for trip cancellation.

Important notes about this coverage

• The travel supplier cannot already be in bankruptcy when you purchase insurance
• The travel supplier must be in the travel insurance company’s approved supplier list on the date the policy is effective
• You must insure at least your trip’s full pre-paid non refundable costs
• You must insure the entire length of the trip (not just a portion of it)
• You must buy your travel insurance protection soon after making the initial trip deposit (typically within 14-21 days)
• The financial default must occur after the plan’s waiting period (typically 7-14 days after the effective date)

What type of policy covers this?

This is not a benefit available in travel medical plans. Instead, you’ll find this coverage in some, but not all, package travel insurance plans.

How much coverage does each company provide?

POLICY	COMPANY	WAITING PERIOD	IF PURCHASED WITHIN	POLICY LIMIT
Classic Comprehensive	Allianz	7 days	14 days	150% of insured trip cost
Deluxe Comprehensive	Allianz	7 days	14 days	150% of insured trip cost
Custom Luxe ***	CSA	14 days	24 hours *	150% of insured trip cost
No coverage	FrontierMEDEX
Preferred ***	Global Alert	14 days	15 days	100% of insured trip cost
Preferred Plus ***	Global Alert	14 days	15 days	100% of insured trip cost
No coverage	Global Underwriters
No coverage	HTH Worldwide
No coverage	MH Ross
No coverage	Seven Corners
Select Advantage ***	Travelex	14 days		100% of insured trip cost
Select ***	Travelex	14 days		100% of insured trip cost
Travel Max ***	Travelex	14 days		100% of insured trip cost
Travel Plus ***	Travelex	14 days	21 days	100% of insured trip cost
Travel Lite ***	Travelex	14 days	21 days	100% of insured trip cost
Tee, Tour, and Travel	Travel Guard	14 days	15 days	100% of insured trip cost
Sportsman’s Travel	Travel Guard	14 days	15 days	100% of insured trip cost
Gold	Travel Guard	14 days	15 days	100% of insured trip cost
Platinum	Travel Guard	14 days	15 days	100% of insured trip cost
Business Traveler	Travel Guard	14 days	15 days	100% of insured trip cost
Adventure Travel	Travel Guard	14 days	15 days	100% of insured trip cost
My Travel Guard **	Travel Guard	14 days	15 days	100% of insured trip cost
Silver	Travel Guard	14 days	15 days	100% of insured trip cost
Plus	Travel Insurance Services	14 days	15 days	100% of insured trip cost
Elite	Travel Insurance Services	14 days	21 days	100% of insured trip cost
Worldwide Trip Protector Gold ***	Travel Insured International		14 days	100% of insured trip cost
Worldwide Trip Protector ***	Travel Insured International		14 days	100% of insured trip cost
Trip Protector Lite Expanded ***	Travel Insured International		14 days	100% of insured trip cost
Basic ***	TravelSafe	14 days	15 days	100% of insured trip cost
Premier ***	TravelSafe	14 days	15 days	100% of insured trip cost
Custom Luxe ***	TravelSafe	14 days	15 days	100% of insured trip cost

* If purchased within 24 hours of your final trip payment

** As an optional upgrade

*** Includes bankruptcy

Summary

• Financial default is not the same as bankruptcy and some plans don’t cover loss due to bankruptcies
• Financial default must be listed in the policy certificate as a covered reason for pre-trip cancellation for the coverage to be in effect
• The travel supplier must be recognized by the travel insurance company
• Benefits are only paid if alternative arrangements cannot be made
• Reimbursement made by the travel supplier will be subtracted from the benefit