The Difference Between Travel Insurance and Waivers

Just when I thought I’d closed the book on travel insurance for a while, along comes a question that warrants a response. As sent, the reader’s message was pretty cryptic:

“How about insurance on cruises?”

Presumably, the reader was addressing the difference between cancelation insurance you get from some cruise lines and trip-cancelation insurance (TCI) you get from third-party insurance companies. And the short answer is, “Cruise ‘insurance’ is often just a waiver of the cancelation penalty rather than true TCI; a waiver can be less expensive, but it probably affords less protection.” Waivers are a common option offered by wholesale tour operators as well as cruise lines, so this question isn’t strictly limited to cruises.

Beyond the waiver question, I also received information from a few travel insurance suppliers, other than the ones I used as sources for my earlier reports, indicating that my initial sources didn’t provide the entire story.

The Waiver Difference

As the name indicates, when you buy a cancelation waiver, the cruise line agrees to waive its usual cancelation penalties if you have to cancel for a “covered” reason. Typically, covered reasons for waivers are about the same as for true TCI—sickness, accident, and such. Some cruise lines and tour operators offer waivers as their only “insurance” option; others give you a choice of waiver or TCI.

In general, waivers offer less protection than true TCI. Waivers:

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• May not include as many covered reasons or persons as TCI.
• Typically do not cover trip-interruption as well as cancelation (coverage for the extra expenses of returning home early if you have to interrupt your trip after you’ve already started).
• Do not include other key components of typical bundled TCI policies, including medical benefits, emergency evacuation, baggage insurance, and such.
• Often pay off not in cash but only in vouchers toward future cruises or tours.
• Do not cover financial failure of the cruise line or tour operator that sells the waiver.

On the other hand, waivers can be less expensive than TCI for anyone—and especially seniors, for whom TCI policies can become very expensive. And waivers from a few big tour operators allow you to cancel for any reason.

More on Pre-Existing Conditions

I heard from a few sources with additions and corrections to my earlier reports, especially regarding the troublesome issue of pre-existing medical conditions.

• TravelSafe noted that its regular exclusion—with early purchase of the insurance—does not apply to non-traveling family members. Because some other policies do extend this exemption to non-traveling family members, I believe this is a disadvantage in their policies.
• On the other hand, TravelSafe, unlike many competitors, has neither a “black list” of travel companies it excludes from financial failure coverage, nor a “white list” of the companies it does include. TravelSafe covers failure of any supplier that occurs more than 15 days after purchase of the policy other than the agency that sells you the policy. That’s a plus for TravelSafe.
• TerryTours Travel Insurance noted that it sells some policies offering a waiver of the pre-existing exclusion up to the time you make the final payment rather than the initial payment, as is the case with many policies. In checking with TerryTours, I find it appears to be an excellent online insurance agency comparable with the eight I listed in my earlier report. In fact, its website offers some very useful search functions for travelers interested in the details of specific individual coverages.

On a different subject, CSA reported that it does not cancel all benefits if you don’t buy to the full value of your nonrefundable prepayments, as some companies do. If you pay for less coverage than your maximum exposure, you recover only what you pay for, but you do recover that much.

Read the Fine Print—Please!

All in all, these recent communications from various insurance suppliers reinforce my earlier conclusion: The fine print is important and it does differ from one company to another. You have to decide which risks are most worrisome to you and buy a policy that best addresses those risks. Fortunately, the various websites make it easier than ever to compare the fine print. But if you have questions, all of the online insurance agencies also answer telephone or email inquiries.

As to the question of waiver or TCI, I generally come down on the side of TCI. If you’re buying insurance, you should buy insurance with the broadest possible coverage within the limits of reasonable pricing. The main exception is older seniors—age 75 or over—for whom regular TCI can become prohibitively expensive.