What Is Trip Cancellation Insurance?

Americans spend a lot of time and money planning vacations and travel. Transportation, accommodations, food and tourist activities consume much of their travel budgets. But what happens to those expenses when you need to postpone or cancel a trip because of unforeseen events?

Trip cancellation insurance offers at least partial compensation for travel expenses you’ve paid for before your journey. This guide looks at some of the basic features of trip cancellation insurance, the options you have and how a policy works.

Understanding Trip Cancellation Insurance

Trip cancellation insurance covers many expenses that could arise if you need to cancel a trip for unforeseen circumstances. You can purchase insurance when you book your trip or a short time after. The coverage period runs from the time you book travel plans to the beginning of your trip.

Some of the typical prepaid expenses that trip cancellation insurance may address include:

• Airline or transportation tickets
• Tour packages
• Hotel and lodging accommodations
• Rental vehicles
• Event or theme park tickets
• Cruise reservations

Standard trip cancellation insurance policies reimburse a percentage of prepaid expenses up to certain limits. The reimbursement amount hinges on the coverage options you choose.

To get compensated for your cancellation, you’ll have to file a claim with your insurance provider and provide proof of the reasons for cancellation. You may be asked to show paperwork, such as medical records, death certificates, proof of event cancellation and other supporting information.

Trip Cancellation Insurance vs. Trip Insurance

Trip cancellation insurance can be part of an overall trip insurance policy. It strictly covers expenses that emerge from the act of cancellation, including penalties and administrative costs.

A general trip insurance policy can cover a wider range of incidents. For instance, it might cover trip interruptions, travel medical insurance, loss or delay of baggage, car rental, emergency medical evacuation and more.

What Does Trip Cancellation Insurance Cover?

Some of the most typical events that trip cancellation insurance addresses are as follows:

• Medical emergency or illness
• Death in the family
• Natural disasters at the destination
• Terrorist attacks or civil unrest
• Jury duty or court subpoena
• Documented theft of passports or visas
• Evacuation orders at your destination
• Damages to the policyholder’s residence due to fire, flood or other events
• Bankruptcy of named travel suppliers

Other events beyond your control may be included in a trip cancellation policy as well.

What is Not Covered?

Typical trip cancellation insurance doesn’t cover events that the traveler foresees or anticipates. Events and conditions that are usually not covered include:

• Pre-existing medical conditions the traveler didn’t disclose
• Plan changes for personal reasons
• Failure to obtain passports or visas
• Uncovered financial circumstances such as job loss
• Travel against the advice of doctors
• Travel supplier’s refusal to refund or change plans unless they file for bankruptcy
• Cancellation due to the traveler’s participation in illegal or criminal activity
• Failure to allow enough time for travel

Take time to ask your insurance agent and read the fine print of your policy to learn what it does and doesn’t cover.

What is “Cancel For Any Reason” Trip Insurance?

Cancel For Any Reason (CFAR) trip insurance is exactly what it sounds like: an optional policy upgrade that covers trip cancellations for any cause. It gives travelers more flexibility in protecting against financial loss. A CFAR policy offers at least partial reimbursement for travel cancellation expenses, but it can be more expensive than a standard trip cancellation policy.

How Much Does Trip Cancellation Insurance Cost?

Trip cancellation insurance premiums vary according to several factors, such as:

• Age of traveler
• Number of people traveling
• Length of trip
• Certain travel expenses
• Insurance plan options
• Coverage limits

As a guideline, you can expect the premium for trip cancellation insurance to cost between 4% and 10% of your total trip cost.

Case Study for Trip Cancellation Insurance

To illustrate how trip cancellation insurance works, let’s look at a hypothetical case study. Kate has booked a dream vacation to Cancun, Mexico. The total cost of her trip, including accommodations, flights and activities, comes to about $5,000. 

On top of her trip insurance, Kate purchases cancellation insurance for $250. The policy covers 75% of the total trip cost. Ten days before Kate is scheduled to leave, her mother falls seriously ill and needs round-the-clock care. Kate decides to postpone her vacation to Cancun to stay with her family for support during her mother’s illness.

Kate files a claim with her insurance provider. The carrier reviews her claim and approves her reimbursement. Kate receives 75% of her overall trip cost, a total of $3,750. The remaining $1,250 comes out of Kate’s pocket, but that’s far better than forfeiting the entire $5,000.

Pros and Cons

There are many benefits to trip cancellation insurance. However, some disadvantages may cause you to rethink buying a policy.

Pros

Some of the advantages of trip cancellation insurance include:

• Financial protection against unforeseen events
• Flexibility of policy offerings, including CFAR insurance
• Protection against travel suppliers’ financial or business struggles
• Coverage for travel interruptions or delays
• Emergency assistance coverage in certain policies

The main benefit of trip cancellation insurance is a sense of relief that your finances won’t take a hard hit if you need to cancel or reschedule your trip.

Cons

Trip cancellation insurance may not be entirely feasible for several reasons, including:

• High premium cost
• Limitations or restrictions in coverage
• Excessive documentation needed to file claims
• Only partial reimbursement of your overall trip costs
• Exclusions for predictable events, such as political unrest, weather problems and travel advisories

Read the fine print or ask your agent to verify what events are covered or excluded from your trip cancellation insurance.

How to Get Trip Cancellation Insurance

Purchasing trip cancellation insurance is similar to obtaining other types of insurance. Many major international insurance companies offer coverage as part of an umbrella trip policy. Alternatively, they’ll offer it as a standalone policy. Vendors that provide trip cancellation insurance can include:

• Travel suppliers and providers
• Insurance companies
• Credit card companies
• Travel comparison websites
• Employer benefits packages

Especially with employer benefits, check to make sure you’re not already covered for trip cancellation insurance before lining up a new policy.

Compare the Best Trip Cancellation Insurance From Benzinga’s Top Providers

What providers offer the most complete trip cancellation insurance policies? This table outlines some of Benzinga’s preferred carriers.

Trip Cancellation Insurance: A Sense of Financial Security

Having to delay or cancel a vacation is usually a major disappointment, but it’s often unavoidable. Trip cancellation insurance can relieve at least some of the financial burden that those last-minute changes can impose. Before your next extended vacation, check to see whether trip cancellation insurance makes sense for you and your traveling companions.

Frequently Asked Questions