What is a covered reason for trip cancellation?

Coronavirus Update: There are many covered reasons for trip cancellation. But the only way to cover Coronavirus-related fears would be a Cancel For Any Reason plan. Standard trip insurance does not cover canceling for Covid concerns. We’ll talk more about this type of coverage towards the end of this article.

What is a covered reason for trip cancellation? The answer is not one size fits all – it depends on the specific plan you have and the company in question. It also depends on whether you have trip cancellation or trip interruption coverage. Today’s discussion will cover all this and more.

To protect yourself and your investment to the fullest, we recommend going with cancel for any reason travel insurance. Otherwise, you may end up having to cancel a fun trip – while dealing with the stress of not getting your money back. Let’s get right into the big question you came here with today:

What is a covered reason for trip cancellation?

Many travelers assume that if you buy travel insurance it will cover everything. But this is not true. A travel insurance policy has something called “named peril” coverage. This means it lists what it covers. If the scenario you are facing on a trip isn’t listed as a covered reason, you won’t be reimbursed. If the situation is listed as a covered reason, you will be eligible to make a claim. It’s as simple as that.

Here’s an example of the covered reasons from a travel plan called RoundTrip by Seven Corners:

As you can see, the policy defines what are covered reasons. It lists the death of you, a family member, traveling companion, or business partner. It lists the same thing for sickness or injury.

Below that, it lists you or a traveling companion being quarantined. It also lists being required to serve jury duty.

This is why you need to know the covered reasons listed in your plan. Depending on the plan you choose, there may be as many as 20 or 30 covered reasons for canceling your trip. These covered reasons will vary by the plan you buy.

Covered reasons vs foreseeable events

Insurance covers unforeseen and unexpected events. A traffic accident would be unforeseen and unexpected damage to your car.

But if you plan on entering a demolition derby, that is not unexpected and unforeseen damage. An insurance company would be out of business if they insured that.

What does this have to do with travel insurance?

If you know something will happen to make you cancel, that’s not unforeseen and unexpected. If a hurricane is forecast to hit your resort, it’s too late to buy travel insurance.

Here’s an example: you want to go to the Bahamas and wait until you get a good deal. At the same time, you notice that a named hurricane is headed toward your destination. Purchasing travel insurance isn’t going to cover canceling your trip. You would need to buy travel insurance before the storm is named.

Yes, this is true even if the list of covered reasons for your plan says it covers natural disasters. You, and everyone else, could see the storm was coming when you bought the plan.

How does trip cancellation and trip interruption insurance work?

Trip cancellation insurance and trip interruption insurance are two popular coverages. They are the biggest reason travelers buy travel insurance. Here’s why:

• Trip cancellation will reimburse you for the pre-paid, non-refundable travel expenses. This includes airfare, cruise, train, hotel, tours, and more. If you have to cancel your trip for an unforeseen covered reason, you get your money back.
• Trip interruption is similar and reimburses the unused part of your trip if it’s cut short. If you need to return home for an unforeseen covered reason, you get your money back for the unused parts of the trip.

These two coverages are in comprehensive travel insurance. They work together to ensure that you will not lose all the money you paid for a trip. Here are some situations where these coverages are helpful to travelers:

• Jan and Sarah purchased their once-in-a-lifetime Mediterranean cruise. It includes flights and a long stayover with family in Croatia after. A week before they’re scheduled to leave, Jan has a heart attack and they cancel their trip to take care of her.
• Linda and Victor are traveling through Mexico on their first trip in retirement. An earthquake strikes Mexico City but they’re not injured. The devastation in the area means they can’t access many of the sights they planned to see and they head home.

In both situations, travel insurance helps these travelers get their money back. In the case of an interrupted trip, travelers will also be paid back for unexpected expenses like transportation home. Here are some examples of reasons for trip interruption coverage.

So, what reasons for canceling a trip are covered by insurance?

The covered reasons will vary by policy, but in general, the covered reasons for canceling a trip will include:

• Injury or illness of insured, travel companion, family member, or business partner
• Hurricane or natural disaster strikes destination
• Bankruptcy or financial default of travel company
• Terrorism or mandatory evacuation at destination
• Death or hospitalization of the destination host
• Home or business damaged, vandalized, or burglarized
• Jury duty, a required court appearance, or military redeployment
• Required to work, terminated, or transferred
• Victim of felonious assault prior to the trip
• Traffic accident prior to the trip
• Theft of passport or visa prior to the trip
• School year extension
• Legal separation or divorce
• Loss of accommodations abroad due to an illness or death of host family or friends
• and more

Of course, it’s important to note that travel insurance plans vary in their coverage. You will have to check your plan for a specific list of covered reasons.

Note the terminology above “unexpected and unforeseen.” That’s important because your trip isn’t covered if the illness or death in the family occurs after a known illness or health condition.

If you have to cancel your trip, the situation must qualify as a covered reason for you to be eligible to make a claim. You won’t get a check from the travel insurance company unless the reason you’re canceling is listed.

What reasons are not covered by trip cancellation insurance?

We said this before, but it’s worth saying again. Travel insurance doesn’t cover everything that can happen on a trip. Trip cancellation will not cover cancellations due to situations like the following:

• Getting detained at customs and missing your flight
• Minor illnesses (flu anyone?) that are making you feel terrible
• Canceling your trip because you have too much work to do
• Cancellations due to an illness or injury related to a pre-existing condition
• Changing your mind about the trip

How much does trip interruption and trip cancellation insurance cost?

The cost for trip cancellation insurance and trip interruption insurance depends on several factors, including:

• Age
• Length of trip
• Number of travelers
• Cost of trip

Comprehensive travel insurance with this coverage costs 4-10% of the insured trip cost.

If you purchase a cruise with flights included and your total is around $6,000, the plans available to you will range from $240-$600 depending on the type of policy, other included benefits, etc.

Why travelers prefer trip cancellation insurance

The most popular reason travelers purchase travel insurance is to have trip cancellation coverage. It makes sense too. No one wants to lose all the money they’ve laid out for a trip. And because travel insurance cannot cover “everything”, you need to know the covered reasons for trip cancellation that are included in the plan you choose.

Here’s a very common fear...

You have reserved your trip. Maybe it’s a cruise with a lot of pre-paid costs and a terrible cancellation policy.

Or you booked an African safari complete with airfare, tours, hotels, and guides.

But what happens if your 12-year-old gets the flu right before you leave? Or your husband slips and breaks his leg?

Will you get your money back if you need to cancel last minute?

Trip cancellation coverage pays back 100% of your travel cost if you have to cancel your trip for a covered reason.

Note: The covered reasons for a trip cancellation are the same covered reasons for trip interruptions.

To enjoy peace of mind, stick with cancel for any reason coverage

Travelers can consider purchasing optional ‘Cancel for any reason’ coverage.

This coverage lets you cancel for any reason and receive reimbursement.

It costs more for this upgrade, usually about 50% of the base cost. But for travelers who want peace of mind, it’s worth the cost.Note: There are no travel insurance plans that allow you to cancel your trip because you’re worried about civil unrest or political upheaval. If this is a concern on your trip (and in some parts of the world, it’s a valid concern), ‘cancel for any reason’ coverage can help you get a portion (usually 75%) of your travel investment back.

How to buy trip cancellation insurance for any reason

What is a covered reason for trip cancellation? Final Thoughts

Now that you know what is a covered reason for trip cancellation, there is just one thing left to do – pick your coverage. Here are some final thoughts we want to leave you with before we bring this article to a close.

Trip cancellation coverage protects your trip costs before you leave. Trip interruption will protect you from losses after your trip starts. Both are useful when booking expensive trips or trips with a lot of travelers.

Travel insurance only covers cancellations and interruptions for covered reasons. If it is not on the list, it won’t be covered. The exception is a plan with the Cancel For Any Reason upgrade. Finally, reading your plan documents is critical to knowing what’s covered and what to do in an emergency. Use your free-look period to fully understand what’s in your plan.