If there is one word that describes life during the COVID-19 pandemic, it’s uncertainty. When can I safely enjoy dining out again or go back to work? Will I be able to follow through on my plans to visit Greece in the fall or should I book that dream trip to Paris?
Not only have airlines, hotels, cruise lines, tour companies and other businesses in the travel industry lost billions of dollars, but hundreds of thousands of their customers have lost a significant amount of money. The pandemic has disrupted travel plans worldwide with lock-down measures keeping many at home during peak travel seasons. According to ValuePenguin, 46 percent of people with upcoming travel plans lost money on cancellation fees and nonrefundable deposits, with losses averaging more than $854 per person, the majority from airfare and hotel rooms.
COVID-19 and Travel: Quick Stats
- Nearly half of Americans canceled their summer travel plans due to the coronavirus
- Approximately 25 percent of Americans say they are planning a celebratory trip when the threat of COVID-19 has disappeared
- 40 percent of consumers are more likely to purchase travel insurance when they book a trip in the future due to COVID-19
If COVID-19 canceled your travel plans, you are probably not only disappointed, but likely left trying to navigate obtaining refunds, credits, or vouchers, and spending hours on the phone and in online chats. In many cases, one of the hardest lessons learned is that travel insurance should not be optional. After the pandemic, knowing how and what kind of travel insurance to buy becomes even more critical. Basic travel insurance policies typically do not cover pandemics or fears related to becoming ill – and they usually have a specific list of covered reasons for a cancellation, such as a terrorist attack or job loss. Most consumers purchase standard travel insurance with the belief they will be covered if they cancel their trip due to COVID-19, but those insurance plans often exclude losses that are directly or indirectly related to an epidemic.
If insurance companies were forced to cover pandemics, premiums would skyrocket, or insurers would go bankrupt as insurance never works if everybody files a claim.
While just 5.6 percent of those surveyed on April 6, 2020 stated they were very likely or likely to book a trip within the next two weeks, that figure has steadily increased, with the most recent statistics revealing that 9.7 percent were likely or very likely to book travel in the near future, according to DISQO’s Consumer Confidence in the Context of COVID-19:
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As we move further into the year, the percentage of Americans willing to travel will likely increase. If wanderlust is calling, how should you buy travel insurance after the pandemic?
It’s time to take a much closer look at what you’re purchasing to ensure you’re covered for a wide range of situations, including COVID-19.
Standard Travel Insurance Coverage
While travel insurance plans can and do vary depending on the company, most are built to be comprehensive, protecting travelers from a variety of events that may lead to a financial loss before or during a trip. Standard travel insurance typically can cover travel issues and hazards such as:
- Lost luggage
- Travel delays
- An unexpected job transfer or loss
- Medical emergencies
- Severe weather that prevents you from reaching your destination
- Bankruptcy of the airline
- A terrorist attack at your destination
- Death, injury, or illness affecting you, a family member or travel companion
When researching travel insurance policies, it is essential to ensure you are covered not only for a situation like the coronavirus, but other potential hazards as well. It’s no longer a question of whether or not to buy, but what type of insurance is in your best interest. There are generally two different kinds of travel insurance available.
‘Named Perils’ Travel Insurance
Most travel insurance plans are named perils plans which means coverage is offered for the specific reasons listed in the policy. This type of insurance is less costly, usually 5 to 10 percent of the cost of your trip. For example, if you paid $4,000, you’ll spend between $200 and $400 and receive coverage for causes of loss that are specifically set forth in the policy. If it is not a “named peril” listed in the policy, it will not be covered. Pandemics aren’t usually included in “named perils” travel insurance.
‘Cancel for Any Reason’ Travel Insurance
“Cancel for Any Reason” (CFAR) coverage means just that: you can cancel for any reason and be reimbursed. As we mentioned above, the cost of travel insurance is typically around 5 to 10 percent of the total trip cost, with CFAR coverage adding approximately 40 percent to the cost of standard travel insurance. For example, if you paid $4,000 for a trip and the standard policy is $400, you may pay an additional $160 for CFAR coverage.
If you travel while COVID-19 is still a threat, even a minimal one, cancellations due to travel advisories or fear of traveling are not typically covered under standard polices. The disease has been classified as a foreseeable event since January 21, 2020. Be aware that travel insurance is meant to help with an unexpected event. Similar to a tropical storm or hurricane, when an event becomes a “known event,” it’s usually not a covered reason when the trip is booked after that date. Travelers who purchase CFAR coverage, however, may still be covered, which is why this type of policy is strongly recommended for your future trips.
If you purchase CFAR coverage, you’ll be able to cancel your trip for any reason not already covered in your standard policy. That not only includes reasons related to a pandemic, but situations like civil unrest such as protests or riots in your travel destination. It can help if you endure a financial hardship, encounter personal struggles like a divorce, or decide that it’s just too risky to travel for any reason.
Depending on the specific policy, you can usually cancel up to 48 hours in advance of the scheduled departure date and be reimbursed anywhere from 50 to 75 percent of the prepaid, forfeited, non-refundable trip. Carefully read the fine print of any policy so you are aware of the deadline for making a claim.
Where to Find CFAR Travel Insurance
Due to the pandemic, some insurance companies have stopped offering CFAR travel insurance. There are, however, still multiple options available that will ensure you receive at least some form of compensation should you need to cancel your trip for any reason, including the pandemic.
The best way to find out which insurance providers offer CFAR coverage is to obtain multiple quotes and carefully read the policies of each one regarding trip interruptions and cancellations. Currently, some of the top providers offering CFAR as an option are AXA Assistance USA, John Hancock Travel Insurance and Travel Insured International. Rather than contacting them individually, TravelInsurance.com can save travelers a significant amount of time by simplifying the process. TravelInsurance.com is a member of the U.S. Travel Insurance Association and works with many of the country’s top-rated insurers. You’ll only have to fill out one form and multiple insurance companies will each provide you with a quote, making it easy to compare the pros and cons. Best of all, you can buy online directly on TravelInsurance.com and get instant confirmation of coverage with a lowest price guarantee.
All travel insurance provides a “free look” period of typically 10 to 14 days from the date of purchase., If you miss something in the fine print initially, you’ll be able to get a refund – just be sure to pay close attention to the refund terms.
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