A recent article by Christopher Elliott a consumer advocate and journalist highlights the importance of understanding your travel insurance policy before you make any decisions to cancel your trip.
Travel insurance only covers what is specifically listed in your policy. The list of valid reasons you may cancel and claim are usually found in the “what’s covered” or under the “benefits section” of your insurance policy. If the reason you cancel you trip is not spelled out exactly in your trip cancellation policy, chances are you will not be covered. Even if the reason your cancelling your trip is a covered benefit, there may be conditions and other exclusions which will limit coverage or cause your claim to be denied.
Too often travellers are under the misconception that just because they have purchased a trip cancellation insurance everything will be covered. This is simply not the case. A couple who cancelled their cruise found out the hard way that travel insurance only covers a narrowly defined set of circumstances.
The couple decided to cancel their cruise after a devastating earthquake struck Chile on Feb. 27, just a few days before their departure. At the same time the US State Department issued a Travel Advisory to avoid non-essential to Chile. According to a source quoted by Elliott, the insurance company denied the claim because the the travel advisory was limited to the Santiago region.
Since the hotel was open and accepting guests during the time of the couples stay, the insurance claim was denied. In order for the claim to be covered under the policy the hotel would have had to be completely uninhabitable which was not the case. Canceling a trip due due to fear of traveling or other concerns not specified in the policy will not be covered under your trip cancellation insurance. Some travel insurance policies include a special benefit for cancellation for “any reason”. However typically if you claim under the “any reason” benefit these policies will only reimburse a percentage of your trip cost. This means that you would not be entitled to a full refund and your claim usually will be limited to 50% of total trip cost.
As a result the couple lost their entire cruise investment of $7,100. A costly mistake which could have been avoided if they had carefully read their travel insurance policy or contacted the claim department prior to cancelling their cruise holiday. Also, it is really important to contact the insurance company directly and not rely on the advice given by your travel agent or booking agent.
In this example the the unfortunate couple may have reacted too quickly and jumped the gun by cancelling their cruise before getting all of the facts or seeking guidance from their insurance company. If they had called their travel insurance company prior to cancelling they would have been advised that they did not have a valid reason for cancelling the cruise. No doubt, they may have decided to travel knowing it would have cost them $7,100 to cancel the trip.
Usually when a claim is denied the “fine print of the policy” is blamed. The reality is that although travel insurance provides valuable benefits it does not cover every possible eventuality that might cause you to cancel your trip. The best advice is to read your policy carefully before deciding to cancel or contact the insurance company to make certain your cause of cancellation is a covered benefit of your trip cancellation insurance.
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