What are trip cancellation and trip interruption insurance?
Trip Cancellation Insurance will reimburse you for the amount of pre-paid, non-refundable travel expenses (e.g. airline, cruise, train, hotel, etc.) that you have insured, should you cancel your trip before departure for an unforeseen covered reason.
Trip Interruption Insurance is similar to cancellation coverage, but covers you while you are on your trip for a list of covered reasons. In case of a covered reason you are required to return home, Trip Interruption Insurance will reimburse you for the lost portion of your trip, as well as any additional expenses for a last-minute flight home.
Trip Cancellation and Trip Interruption Insurance are often sold together as a bundle. You can also add Travel Medical Insurance to the bundle.
How does Trip Cancellation and Trip Interruption Insurance Work?
Here are two examples of how Trip Cancellation and Trip Interruption Insurance works:
Rob and his wife Leslie are planning a Caribbean cruise vacation from Miami, and they’re wondering if they should buy Trip Cancellation Insurance. The trip will be expensive, and they will have to pre-pay for a number of things in advance, most of which will be non-refundable — such as airfare and the cost of the cruise.
They are worried that should they have to cancel their trip before they leave, they would completely lose the money that they have pre-paid for the non-refundable parts of their trip. And it could take years before they could save that much money again to take the same trip.
Leslie suggests they purchase Trip Cancellation Insurance. She finds a policy she likes because it will reimburse her and Rob for the full amount of pre-paid, non-refundable travel expenses that they have insured, should they have to cancel their trip before departure for an unforeseen event covered under the policy.
A week before they are scheduled to leave on their trip, Rob breaks his leg in a skiing accident. His doctor deems him unfit to travel. So they make a claim under their Trip Cancellation Insurance and receive a full reimbursement of their pre-paid travel expenses.
Linda and Vince are thinking of purchasing Trip Interruption Insurance for their upcoming European holiday.
Trip Interruption Insurance is similar to Trip Cancellation Insurance, but the former covers insured travellers for unforeseen events that occur after a trip has begun, rather than before it starts. If they have to return home for a covered reason, Trip Interruption Insurance will reimburse Linda and Vince for the lost portion of their trip, as well as for any additional expenses for a last-minute flight home.
Since Trip Interruption Insurance can be purchased along with Trip Cancellation Insurance, Linda and Vince decide to get both at the same time so that they will be protected should an unforeseen covered event cause them to have to cancel their trip or end it prematurely.
It will vary by policy, but Trip Cancellation and Interruption Insurance will generally cover reasons such as:
- the unexpected illness or injury of you and/or a traveling companion that deems you unfit to travel, by order of a licensed physician;
- the hospitalization or death of a family member;
- circumstances beyond your control that result in the cancellation of the public transportation you have paid for to get you to your destination;
- unforeseen natural disasters at home or the destination;
- a legal obligation, such as being called for jury duty or to appear as a witness in court.
It’s entirely up to you. But the investment you make when booking travel arrangements can be significant and you may not be able to cancel your trip without incurring significant cancellation penalties. If you must disrupt your trip and return home prematurely, the costs can be even more severe. It boils down to how much money you are prepared to put at risk, your age, the health of yourself and your immediate family members, and whether you have sufficient coverage elsewhere such as through a credit card. Generally speaking, the more money at risk, the more you should consider purchasing Trip Cancellation and Interruption Insurance.
Are there any conditions not covered with Trip Cancellation and Trip Interruption Insurance?
Trip Cancellation and Trip Interruption insurance covers you for the perils listed in the Description of Coverage. This does not cover events known to you at the time you buy the insurance. In other words, if what was expected causes a claim, your claim will not be covered. It also does not cover things like getting detained by customs and missing your flight, cancelling because of a work obligation, and cancelling due to an illness or injury related to a pre-existing medical condition that is not covered.
Coverage for some pre-existing medical conditions is available under most Trip Cancellation and Trip Interruption Insurance policies, but the condition usually needs to be stable for a specific period of time prior to buying the insurance and it must take “a turn for the worse” after to qualify for coverage. Depending on the insurer, you may have to purchase your Trip Cancellation and Trip Interruption Insurance within a certain period of time before you depart – typically before the cost of what you are insuring is non-refundable (e.g. when cancellation fees for cruises or hotels take effect).
The cost of Trip Cancellation and Trip Interruption Insurance will depend upon a number of factors including your age, health, trip duration, number of people insured, cost of the trip and provincial sales tax. The amount of non-refundable travel expenses you wish to insure is particularly relevant to Trip Cancellation Insurance. In general, you should expect that a combined Trip Cancellation and Interruption Insurance plan will cost anywhere from 4% to 10% of your total pre-paid, non-refundable trip cost. For example, if you purchased a trip with a total cost of $5,000, the travel insurance policies available to you will likely range in price from $250-$500, depending upon the type of policy and other variables.
Yes, some credit cards provide travel insurance as a benefit, but you need to verify what type of coverage is included, how much protection it provides, and what limitations exist.
For example, some credit cards provide Trip Interruption Insurance, which will qualify you for a refund (up to a maximum amount) should a covered event happen after your departure. Other cards, usually those with a higher annual fee, also provide Trip Cancellation Insurance, which also qualifies you for a refund (up to a maximum amount) should a covered event happen before your departure.
It’s important to verify what the maximum limit is for the travel insurance provided by your credit card so that you can recover most or all of the costs of your cancelled or interrupted trip. In some cases, your card will cover up to $1,500 per covered person, and an overall maximum of $5,000 for all covered persons (those for whom the travel was paid for by the card). If your trip will cost significantly more than this, you should consider purchasing additional Trip Cancellation and Trip Interruption Insurance.
Many credit cards also have age limits on their Trip Cancellation and Trip Interruption Insurance which can start at 65 or 70 years of age. And some credit cards do not provide any travel insurance. So it pays to read your credit card insurance booklet and ask questions if you are unsure of your coverage and the conditions you need to meet. In order to be covered, you generally need to charge the entire cost of the trip on the credit card offering these insurance benefits.
A number of banks and credit unions in Canada, including most CAFII member financial institutions, offer Trip Cancellation and Trip Interruption Insurance to their existing customers. Employees at CAFII member institutions are trained and knowledgeable about the products they sell, and they can be conveniently reached in branches or at call centres. You can find a list of CAFII member institutions at: https://members.cafii.com/index.php/members_voting.
