Trip Insurance 101 for Fall and Winter Vacations

By now, many of you are planning where you’ll go for a fall or winter trip. Many of those trips will likely require you to pony up a large deposit or advance payment (payments that often are either nonrefundable or carry large cancellation penalties) if you subsequently have to cancel your trip. You may also have to make those payments a long time in advance. If your trip fits either category, you’re a candidate for trip-cancellation insurance (TCI) and trip-interruption insurance (TII), almost always sold together in a bundle. And if so, you need to know what TCI/TII does do, doesn’t do, and how to avoid pitfalls if you aren’t careful when you buy.

What TCI/TII Does

The TCI component refunds whatever advance deposits and prepayments you can’t first recover if you have to cancel your trip before you leave, and TII pays those costs plus possible extra costs of returning home early if you have to abort your trip after you’ve started. All TCI/TII covers cancellations or interruptions required by something that happens to you or a traveling companion (sickness, accident, and such) and most covers you if something happens to a close family member who isn’t traveling with you. But when you buy TCI/TII, the devil is in the details:

Preexisting Medical Conditions

Typical policies exclude cancellation or interruption due to a preexisting medical condition (a flareup or recurrence of some sickness treated within a certain period before purchase, typically 90 or 180 days). According to John Cook, who runs the popular travel insurance agency, QuoteWright, “up to 25 percent” of all TCI/TII claims involve a preexisting medical condition. Fortunately, you have an easy way to avoid arguments about preexisting medical conditions: Many policies waive that exclusion if you buy the insurance shortly after you make your first payment or deposit, usually one or two weeks.

Full Payment

Cook also notes that “the biggest pitfall is not insuring the full, prepaid value of your trip.” If you cover less than the full cost (even if you just “round down” your prepayments) some policies will invalidate the entire coverage.

Foreseen Conditions

Even if you take advantage of a preexisting conditions waiver, an insurer can still deny your claim for a loss due to a preexisting condition that is foreseeable at the time you buy the policy. If, for example, a close family member has previously been diagnosed with late-stage terminal cancer, you probably can’t cancel your trip because that person suddenly gets worse or dies.

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Named Perils

TCI/TII policies include a list of specific “covered reasons” or “named perils” that are covered as reasons for cancellation/interruption. The corollary, of course, is that, “If it isn’t specified, it isn’t covered.” And although almost all policies cover sickness and accidents, they vary considerably in how they cover problems at your destination that might make you want to reconsider your visit: hurricanes, civil unrest, and such.

What TCI/TII Doesn’t Do

Like most insurance, TCI/TII is about money … and only money. It can’t preserve your vacation, arrange or pay for an alternate trip, or otherwise preserve your trip experience. And because all TCI/TII is inherently secondary, it compensates you only for the amounts you can’t first claim from your travel suppliers or other insurance policies. That means you could remain out-of-pocket for months, and you’ll have to pay up front for any substitute arrangements.

The best way I know to avoid these several pitfalls is to buy a “cancel for any reason” policy. Those variants generally cover the standard “named perils,” but in addition. they allow you to cancel for any reason. Typically, the “any reason” benefit is limited to cancellations more than a few days before departure, and the payout may be less than 100 percent. And, of course, they’re typically more expensive than conventional policies. But if the price isn’t too stiff, that extra flexibility means that you, not an insurance company bean-counter, decides whether or not you should cancel a trip.

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Ed Perkins Seniors on the Go is copyright (c) 2012 Tribune Media Services, Inc.