When Should I Buy Travel Insurance or Cancel My Trip?

Dear H+A:

I just put down a deposit on a European river cruise (with airfare included) worth a total of $9,500 for this coming summer. I have no reason to think that we’d need to cancel the trip other than heightened fear about the coronavirus, which is now starting to spread outside of China. I wonder if I really need additional travel insurance (and, if so, see the attached cruise line’s policy) or if my credit card and employer-provided health insurance are enough.

Can you give me any quick tips as to what my considerations should be to make this decision? If I cancel my trip tonight, I will only be out $200 and able to wait out the potential coronavirus pandemic. Otherwise, I need to pay for my trip and make a decision about whether to buy insurance this week.

Thanks for your help!

Scott

Dear Scott:

Thanks for your question! We know how confusing travel insurance policy options can be, especially when you’re in a hurry to make a decision, and hope our research below can help.

1. Make a Decision on Purchasing Travel Insurance Promptly Before The Deadlines Expire

First, you are correct that making the decision to purchase travel insurance should be made soon after making your initial trip deposit.

According to our research, the best time to consider purchasing travel insurance is at the time of making your deposit or within 14 to 21 days thereafter because (1) some policies allow pre-existing medical conditions if you purchase your travel insurance within 7 to 14 days (depending on the policy) of the initial trip deposit, (2) some policies provide financial default coverage only if purchased within 10 to 21 days after the initial trip deposit date, (3) some policies only cover losses due to events occurring after the policy is purchased, and (4) some policies allow for a cancel-for-any-reason upgrade if purchased upgrade within 7 to 21 days of making the initial trip deposit.

Note that your cruise line’s plan is available if purchased 120 days or more before your departure (or at the time of your initial payment if less than 120 days) and covers pre-existing conditions if purchased within 14 days of your initial payment.

2. Protect Your Savings By Getting Coverage for Massive Unanticipated Costs

Second, you should get a handle on your priorities, which is to protect your hard-earned savings against massive unanticipated costs. Travel insurance can cover a wide variety of losses from lost luggage to emergency evacuation, but the financial costs of losing your luggage pale in comparison to a medical evacuation. Don’t get distracted by minutia and fail to make a decision that could cost you $100,000 or more.

A quick look at the policy coverages for various plans can give you a fairly good idea of what types of risks have the potential to be the most expensive:

Loss	Your Credit Card Coverage	Typical Per Person Coverage Ranges for Single Trip Travel Insurance
baggage delay	$100 daily limit	$100-750
baggage & personal items loss	$3000	$500-3000
missed connection		$100-2500
trip delay	$500	$150-1500
trip cancellation	up to $5000 per person or $10,000 per trip	$9500 (100% cost of trip)
trip interruption	up to $5000 per person or $10,000 per trip	100-150% cost of the trip
24 hour AD&D	$100,000	$5000-100,000
flight only AD&D or common carrier AD&D	$500,000	$10,000-75,000
emergency medical/dental		$10,000-250,000
medical evacuation & repatriation		$100,000-$1,000,000
non-medical evacuation		$25,000

For a more comprehensive review of the different types of coverage and other considerations, see the following articles:

Do I Need Travel Insurance?
The Ultimate Guide to Travel Insurance: Everything You Need to Know
12 Best Travel Insurance Policies and Why You Need Them
The Best Travel Insurance

3. Check Your Existing Trip Cancellation Coverage

Third, you should consider what your credit card(s) (that you will use to pay for the travel expenses) already cover and other sources of insurance.

A. Trip Cancellation – Plain and Simple

Most travel insurance policies include “plain and simple” trip cancellation coverage that is limited to cancellations caused by unforeseen circumstances, including injury, illness, death, weather/natural disasters, and terrorism.

I see that your credit card provides:

- trip cancellation/interruption insurance,
- trip delay reimbursement,
- baggage delay insurance, and
- lost luggage reimbursement.

Because your primary concern is having to cancel your trip due to fear of catching the coronavirus on a river cruise, you should know that your credit card coverage for trip cancellation/trip interruption insurance covers cancellation or interruptions caused by “a loss” preventing you from traveling. Covered losses include (1) your (or your traveling companion’s) accidental bodily injury, loss of life, or sickness or, under certain circumstances, that of an immediate family member; (2) severe weather, (3) a named storm warning; and (4) certain terrorism-related incidents/warnings. That said, there may be an exception if your physician notifies you that travel is not medically advisable and you notify your travel suppliers within 48 hours and start the claims process within 20 days.

Otherwise, your credit card insurance does not cover, inter alia, losses caused by or resulting from, directly or indirectly, (1) a change in plans, (2) a pre-existing condition or any other event that occurs or commences prior to the initial deposit date or booking date of the trip; (3) your disinclination to travel due to civil unrest or an epidemic or pandemic, (4) any type of war or warlike acts; (5) the financial insolvency of a common carrier or your travel agency, tour operator, or travel supplier; (6) travel arrangements canceled or changed by a common carrier, tour operator, or any travel agency unless the cancellation is the result of severe weather or an organized strike affecting public transportation; or (7) trips that exceed 60 days in duration.

B. Trip Cancellation – Fully Involved

Now that you know that your credit card probably will not cover your cancellation of the trip due to fear of the coronavirus, you should research single trip or annual travel insurance policies depending on how often you travel.

If you’re a Firehouse Subs aficionado, you’ll know that “fully involved” means with all of the toppings on the sub. The corollary in travel insurance terms would be the “cancel-for-any-reason” or CFAR add-on to a travel policy to recoup up to 75 percent of the trip cost, which generally has to be purchased within 7 to 21 days of making the initial trip deposit. A CFAR add-on costs about 30 to 60% more than a plain and simple policy, and it cannot be purchased by itself.

According to the travel insurance websites, the coronavirus is a known event and, therefore, a CFAR policy is recommended (except for residents of New York State). You can buy travel insurance with CFAR coverage online (see InsureMyTrip, Squaremouth, VisitorsCoverage.com, G1G.com, QuoteWright.com, and TravelInsurance.com), through a travel agency, or directly with an insurance company.

Your cruise line’s policy offers a “cancel for any reason” waiver of their cancellation penalties and will reimburse you in cash or travel vouchers (depending on the reason for cancellation). Their cancellation penalties next week will start at 20% of the full fare and then rise to 100% of the full fare within a month before the trip (or from $1900 to $9500 of your trip cost).

4. Check Your Existing Medical Coverage

Finally, you should know that there is a distinction between travel insurance, which is intended to protect the cost of your trip, and travel medical insurance, which covers the cost of receiving medical attention while abroad. From the materials that you sent me, your employer-provided health insurance will consider claims for reimbursing urgent or emergency medical care received outside the United States if contacted prior to receiving care or within 24 hours (have your family or a physician call if you cannot). Other readers should know that Medicare generally does not cover health care overseas.

I see that your credit card provides:

- travel and emergency assistance services, and
- travel accident insurance.

With respect to the travel and emergency assistance services, the card provides free services, including an emergency message service, medical/legal referral assistance, emergency transportation arrangements, ticket replacement, lost luggage locator, emergency translation, prescription assistance and valuable document delivery arrangements, and pre-trip assistance. Note, however, that all costs are borne by the cardholder. With respect to travel accident insurance, the card provides coverage for losses caused by common carriers and other accidents during your trip.

You should also know that very few health insurance companies pay for your medical evacuation back to the United States, which can cost more than $50,000. Because your credit card does not provide additional coverage for medical evacuation, you should consider getting additional coverage for this risk (the cruise line’s policy included coverage) or getting another credit card that does cover the risk. Unlike CFAR coverage, medical evacuation insurance can be purchased on its own.

Conclusion

You can either (1) cancel tonight, lose $200, and wait out the potential coronavirus pandemic, or (2) pay for your trip in full and purchase the cruise line’s policy (for 100% cancellation coverage for either cash or voucher depending on the reason) or a travel insurance policy (for up to 75% cancellation coverage). We hope this helps you make your decision!