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When does travel insurance cover you for cancellations?
Know when you can claim the cost of your trip back with travel insurance for cancellation.
Did a serious earthquake hit Japan a week before your flight? Did you dislocate your ankle playing basketball? Did your grandmother pass away? Did your home get flooded? All these are legitimate reasons to make a trip cancellation claim.
The right travel insurance will pay you back for your lost deposits and non-refundable travel costs (like flights) if you need to cancel your pre-paid trip due to something unexpected and outside of your control.
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Why do you need travel cancellation insurance?
Let’s face it: “stuff” happens. That’s why cancellation cover is such a crucial part of travel insurance. You could pay in advance for all your flights, accommodation, park passes and other holiday expenses and then, boom.
An accident lays you up, a natural disaster strikes your destination or a family emergency requires you to stay home.
In short, trip cancellation cover will pay you back for the money already spent if something like this happens and you’re forced to cancel your holiday. It also covers you if something similar causes you to cut your holiday short mid-trip.
What exactly does travel cancellation cover?
Here are some examples of pre-paid travel expenses you can be reimbursed for under trip cancellation cover:
- Cancellation fees charged by airlines, hotels, tour operators, rental car companies and more
- Non-refundable deposits for pre-booked flights, accommodation, tours and more
- Travel agent cancellation fees
- Lost frequent flyer points that cannot be recovered
- Additional travel expenses if you need to return home partway through your trip
- Tuition fees if you had paid for a course or training at your travel destination
What are some legitimate reasons you would be covered?
Some insurers come right out and tell you what they’ll cover, while others only tell you what they won’t cover (these are called exclusions and we’ll talk about them later). At any rate, what the covered events all have in common are that they are:
- Outside of your control
Below are some situations that are commonly recognised as qualifying for cover, as long as there’s no way you could have seen them coming (ie, unexpected). Just make sure you check your insurer’s policy documents because not every insurer treats these situations exactly the same.
- Cancellation due to a close relative’s illness or death. This usually applies to immediate family members (including step-family) and extends to: grandparents, grandkids, in-laws, fiancés, de facto partners and official guardians. Some policies will also include first cousins, aunts, uncles, nieces and nephews and even business partners. However, if one of them had a serious illness before you bought the policy, you probably won’t be covered.
- You die or suffer a serious illness or injury. Similar to above. If you come down with pneumonia, break your ankle playing basketball or suffer some other serious illness or injury, you will be covered as long as it’s not caused by a pre-existing condition or you weren’t acting recklessly when it happened. If you die, the funds will be paid to your estate.
- A natural disaster batters your destination. This means an extreme event like an earthquake, hurricane, blizzard or tornado makes it unsafe to travel to your destination. Your insurer may want to see evidence of an official government declaration, such as a state of emergency or an official travel warning.
- Your home in New Zealand is burgled or destroyed a natural disaster. To qualify for cover, this would need to happen within a certain time frame of your departure date, and you may need a public authority to confirm why you need to remain home.
- A course you were to attend got cancelled. You’re only eligible to claim for this under trip cancellation if the cancelled course was the sole purpose of your trip. If that’s the case, you can be reimbursed for the cost of the course, plus all of the travel and accommodation costs.
- You’re called up for jury duty or to serve as a witness in court. You will need to provide evidence of this.
- Your employer cancels your pre-approved leave. This applies if you’re a full-time employee and your boss decides to cancel leave that was already approved.
- You’re made redundant at work. This would only apply if you had no reason to believe you would be made redundant and you meet the definition of redundancy under workplace law.
- You become pregnant. This only applies if you become pregnant after you took out the policy and you’ve progressed in your pregnancy beyond a certain point by the time you were supposed to depart (for example, you are 32 weeks pregnant when you were supposed to leave).
Cancellation cover is a standard feature on most domestic and international travel insurance policies, regardless of whether you choose basic cover or a comprehensive plan. However, cover limits are usually much higher on a comprehensive policy.
You can also find it on annual multi-trip policies, which are policies that cover you for multiple trips throughout a one-year period.
You should buy travel insurance as soon as possible after booking your trip because the whole purpose of travel cancellation cover is to cover you for events that happen before your trip. If you wait until the date of the trip to buy insurance, you’re basically wasting your trip cancellation cover.
Let’s say book your trip to Japan today but decide to put off buying insurance. If a an earthquake hits Japan tomorrow making it impossible for you to travel there, you are out of luck.
Let’s take it even one step further. Let’s say a minor earthquake hits Japan tomorrow, but it’s still safe to travel there. Now you decide to buy travel insurance. A couple days later, another earthquake hits and now it’s unsafe for you to go.
You better hope the second earthquake isn’t an aftershock of the first one, because if it is, you’re out of luck. Even though you bought the insurance before the second quake, you bought it after the first one and it was the first one that kicked off all the damage.
Cancellation cover also kicks in if your trip is cut short for the reasons listed above and it pays out for all of the same types of prepaid expenses: flights, accommodation, agents fees, etc.
However, if your trip is cut short, you will also be eligible for other expenses including whatever it costs you to get home to New Zealand or to rearrange your travel itinerary mid-trip. These other expenses and the rules surrounding them are usually found under separate sections of your policy called ‘additional expenses’, ‘alternative transport expenses’, ‘trip curtailment’ and ‘travel delay’.
Keep the above distinctions in mind when reading your travel insurance PDS to find out what is and isn’t covered.
Just because your travel insurance policy includes cancellation cover, don’t assume that you will be covered if you cancel your trip for any reason. As we touched on above, travel insurers only cover you when you need to cancel or cut your trip short due to situations that are unexpected and outside your control. That means no cover will be provided if:
- You need to cancel because your visa is denied or you have passport issues. It’s up to you to make sure you to have permission to enter the country you are visiting. Your insurer won’t pay for your cancelled trip if you’ve gambled on the assumption that your visa would be granted or that your passport would arrive on time.
- You need to cancel due to a pet illness or death. Most policies clearly state that you can only claim for cancellation if it is a relative who dies, and they will make it clear in the fine print what they mean by relative. Pets will almost certainly not be in this list.
- Your best friend dies. Same as above.
- You get reimbursed by the provider. You can’t double up if you’re eligible for a refund through a trip provider like your hotel. Your insurance will only pay for prepaid expenses you can’t get back any other way.
- You change your mind. You can’t cancel your trip just because and expect to get reimbursed. Changing your mind is neither unexpected nor outside of your control.
- You travel against your doctor’s advice. If you’re advised by your medical practitioner not to go on your journey but you travel anyway, your policy won’t provide any cover. Travelling against medical advice is a key exclusion on all policies; however, if you cancel your trip because your doctor says you’re unfit to travel, you’ll be covered for cancellation fees and lost deposits.
- You or your family member had a pre-existing condition that led to the cancellation. If you or your relative got ill, injured or died and this is why you had to cancel the trip, a pre-existing condition would not be considered something “unexpected”. In this case, you would not be covered.
- You had to cancel because of business or contractual obligations. The only exceptions are when a full-time employee is made redundant or has had pre-approved leave revoked.
- Your tour is under-booked. If you’ve pre-booked a tour on your holiday and then it’s cancelled due to under-booking, your policy won’t provide any cover.
- You purchase after something happens or there’s been a warning. Your insurer won’t cover you if you bought your insurance after there had been reports of an approaching hurricane, social unrest or whatever it is you are trying to claim for.
- Timeshare expenses. You insurer won’t cover your timeshare costs, but you’ll still be eligible to claim for flights, attractions, agent fees and all of the other items typically covered under your policy’s cancellation section.
The best policy for one person might not be the best policy for another, so your ideal policy really just comes down to your specific requirements. Here are some tips on how to settle on the right policy:
- Determine your needs and budget. You can find policies with unlimited cancellation cover and policies with only a couple thousand in cancellation cover. Weigh up how much you are spending on your trip with the likelihood you will have to cancel and how much it would hurt to lose that money if you did cancel. This will help you decide how much cancellation cover to get.
- Look at what is covered. Check the policy documents of a few policies to find out what exactly they’ll accept for a cancellation claim. For example some insurers will cover you if you cancel because your first cousin or aunt passes away. Others limit it to immediate family.
- Look at what’s not covered. Read through the exclusions of a few policies to see if there are any that concern you. For example, some policies won’t cover you if you have to cancel because you were injured skiing if you haven’t also purchased their optional ski cover. Having ski cover wouldn’t make sense if you were going to the tropics, so you’d have to watch yourself on the slopes prior to departing.
If you’re making a travel insurance claim for cancellation, there are a few simple things you can do to improve the chances of your claim being paid:
- Get proof of the reason for cancellation. If you need to cancel your trip due to a covered event, make sure you can provide evidence that the event actually happened. For example, you may need a letter from your doctor explaining why you were unfit to travel.
- Get proof of the expenses you’re claiming for. If you want paid for unused travel expenses, you’ll have to show that you actually paid for them and aren’t eligible for a refund. Save all your receipts and itemised bills; collect documentation outlining your cancellation fees and penalties; and get letters from tour operators and travel agents detailing any non-refundable deposits.
- Read the fine print. As we’ve touched on above, travel insurance doesn’t cover you if you cancel your trip for just any reason. Exclusions, terms and conditions apply, so familiarise yourself with them before you cancel your trip.
- Buy travel insurance ASAP. Travel insurance can provide cancellation cover from the moment you purchase a policy, so don’t delay buying it. If an unexpected event occurs before you purchase the insurance, you won’t be covered if that event forces you to cancel your trip.
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