The pre-existing condition catch

If you try to collect on trip-cancellation insurance (TCI) due to a medical problem, the most troublesome issue you’re likely to encounter is whether the problem was unexpected or instead due to a pre-existing medical condition.

A reader currently facing this problem raised the issue in a recent email: “My friend bought travel insurance when she [put down a] deposit for their trip abroad. She was scheduled to leave today, but her mother got sick and was admitted in to a hospital in very bad shape. Because of that my friend canceled her trip. Will her insurance cover the costs of cancellation?” The short answer: “It depends on when the traveler bought her insurance.”

Why trip-cancellation insurance

Many big-ticket travel expenses—especially cruises, tour packages, and vacation rentals—require full payment, in advance, and many of them assess draconian cancellation penalties. Cancellation penalties for cruises and tours are usually on a sliding scale, from small percentages if you cancel months in advance to 100 percent if you cancel a day or two before departure. Penalties on vacation rentals can be up to 100 percent, no matter when you cancel. Obviously, you may well have thousands of dollars at risk.

Trip-cancellation insurance (TCI) is designed to help you offset that risk. If you have to cancel for a “covered” reason, the insurance pays off any prepayments that you can’t recover from the supplier(s). Covered reasons typically include sickness or accident, suffered by you, your traveling companion, or any close relative who remains at home. (Most policies include a bunch of other covered reasons, too, but that’s not in question here.)

Pre-existing medical conditions

Most TCI policies exclude claims for cancellations due to pre-existing medical conditions. That means if you, your traveling companion, or family member must cancel because of a medical condition you/she/he already had at the time of prepayment, the insurance will not pay. The time limit on preexisting conditions varies, depending on the company. Most often, it’s 90 days, but some companies increase it to 180 days.

I’ve heard stories that insurance companies get very hard-nosed about defining a pre-existing medical condition. According to some reports, even a mere visit to a doctor’s office within 90 days of departure to ask about a mild chest pain, for example, would invalidate the insurance in the event of a subsequent heart attack.

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Similarly, even if your chronic problem is under control through medication, the insurance would not pay in the event of an unexpected flare-up of your condition.

Fortunately, most TCI companies give you an easy solution to this problem. Provided you buy the insurance within seven to 14 days of the time you make your first prepayment, those companies waive their usual exclusion for preexisting medical conditions.

Our reader’s situation

Will our reader’s insurance cover her cancellation? Clearly, a mother’s critical illness falls within the covered reasons of any policy I’ve seen, so that isn’t the issue. Instead, the key questions are (1) whether the mother’s illness is a recurrence of a pre-existing condition or something entirely new, and (2) whether our reader bought the insurance within her insurance company’s stated time limit for excluding preexisting conditions. She didn’t specify either in her email to me, but she can certainly figure them out quickly:

• If she bought the insurance in time, it should pay regardless of the nature of her mother’s illness. Even if she didn’t make the deadline, it should also pay off if the illness was something new and not related to any prior health problems.
• But if she didn’t buy the insurance early enough—and if the illness can be traced, even tenuously, to a problem that her mother had suffered within 90 days—the insurance probably will not pay.

Rules for buying TCI

In my view, TCI without a waiver of the exclusion for pre-existing medical conditions is, if not worthless, at least of much diminished value. It’s far too easy for insurance companies to claim a link between a sudden critical illness and what looked like minor or routine treatment months ago.

Clearly, then, a cardinal rule about buying TCI is to buy it as soon as you start paying for the trip. When you shop for TCI, the major insurance companies and online agencies are all pretty much up front about the exclusion and how to waive it. Waiting for more than a week or so is throwing away a good part of the product’s value.