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Travel insurance is an important item for a vacation planning list, especially if your vacation involves big deposits.
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If you need to cancel your vacation, trip cancellation insurance can reimburse you 100% of what you’ve pre-paid in non-refundable deposits if you have an eligible claim.
“You should take out a policy with this coverage if you’re making significant deposits or payments and are afraid of losing your investment,” says Lisa Cheng, a spokesperson for World Nomads, a travel insurance company.
But What’s Covered?
We all know there are many issues that could cause you to cancel a trip, but not all of them are covered by travel insurance. It’s important to read your policy to understand what reasons are acceptable for claims under trip cancellation benefits.
A common reason to cancel a trip is when you, your traveling companion, a family member or business partner gets sick or dies before the trip departure, says Cheng. Other reasons often covered can be anything from work emergencies to jury duty to a sudden bankruptcy of a travel supplier, she says.
Policies may also include coverage for these events::
Your passport or visa has been stolen
You’ve legally separated or divorced
You’re in a traffic accident just before the trip
A hurricane or other natural disaster strikes your destination
There’s a terrorism incident at the destination
Your home or business has been damaged, vandalized or burglarized
Your school year has been extended
Carol Mueller, a spokesperson for Berkshire Hathaway Travel Protection, notes that “U.S. travelers are often naïve thinking their travel supplier will simply return their money because they can no longer go.”
Don’t buy trip cancellation insurance for expenses that are fully refundable. For example, if you have paid for fully refundable airline tickets, don’t insure those.
When to Buy It
When you book a trip, your best strategy is to purchase travel insurance right away—ideally within a week or two. Buying travel insurance early means you immediately start covering problems that can lead to cancellation.
Trip cancellation benefits start on your policy’s effective date and continue until you depart. If you’ve procrastinated on a travel insurance purchase, then suffer a leg injury that forces you to cancel the trip, you’ll have missed the chance to have insurance in place. Coverage is not retroactive.
How to Get Premium Cancellation Coverage
Standard trip cancellation insurance won’t cover issues like a fear of flying or simply changing your mind about leaving home.
If you want the Patrón of trip cancellation, it’s “cancel for any reason” (CFAR) coverage. This optional add-on buys you the ability to cancel for any reason you like, no matter how serious, frivolous or crazy it is.
There are still important points to know:
CFAR coverage generally reimburses 50% or 75% of trip costs, not 100% like regular trip cancellation coverage.
You generally must add CFAR to a travel insurance policy within two to three weeks of your first trip deposit, or the window to purchase it will close.
CFAR may not apply if you’re within two days of your departure date—in those cases you’d still lose your trip money if you’re canceling for a reason not listed in the base policy.
It can add 40% or more to your travel insurance cost.
When considering whether to purchase trip cancellation coverage—whether standard or CFAR—consider your own comfort level regarding the deposits you could lose. Mueller says the No. 1 question to ask yourself is, “Can I afford to lose my trip investment if I am forced to cancel my vacation?”
Trip Cancellation as Part of a Comprehensive Policy
Of course a canceled trip isn’t the only thing that could go wrong with a vacation. You can buy comprehensive travel insurance plans that package trip cancellation with other important benefits such as:
Travel medical insurance, which pays medical expenses during a trip. If you’re traveling overseas, where U.S. health plans and Medicare may provide no coverage, this is a must.
Emergency medical evacuation is among the most expensive problems that could happen on a trip. Coverage pays for your transport to a medical facility or back home if your condition requires it.
Lost baggage is less of a concern than trip medical problems, but many travelers like to include baggage coverage in a plan. It can pay if baggage is lost, damaged or delayed.
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