Travel insurance fit for a pandemic

The pandemic has introduced a discomfiting element of gambling to travel planning. But you can reduce the odds of losing money when your trip is canceled or delayed by buying travel insurance.

The limitations of standard travel insurance have expanded the appeal of a previously obscure upgrade to standard travel insurance known as “cancel for any reason” (CFAR) policies. This option, while significantly more expensive, is more likely to cover the sort of cancellations that COVID19 has made commonplace.

Megan Moncrief, chief marketing officer for travel insurance aggregator Squaremouth, says CFAR has become the go-to plan for more travelers. Traditional travel insurance, she explains, doesn’t cover the majority of pandemic-related claims. And a recent review by Squaremouth found that only 30% of pandemic-related claims were made by people who canceled their trips because they actually contracted COVID-19. That is the only type of pandemic claim that would be covered by most standard travel insurance policies. The remaining 70% of claims were for related reasons, including border closures and quarantines, but those were excluded from non-CFAR policies.

A travel insurance plan from TravelEx for a $12,000, nine-day, two-person trip to Canada, Italy or France in June costs $522, including COVID-19 cancellation protection and trip-interruption protection. CFAR travel insurance for a similar trip from the same insurance provider would cost $730.

Moncrief says that prior to the pandemic, her company was “slow to recommend” CFAR policies because of the expense. At that time, such policies accounted for less than 4% of sales, she says. CFAR insurance now makes up about 8% of sales — but that’s down from 28% at its peak in 2020.

Travel insurance policies with a CFAR add-on typically must be purchased within two to three weeks of the first payment toward the covered trip, according to Squaremouth.

However, certain policies that cover only cruises offer CFAR at any time before a final payment is made for a trip.

Insurers now demand that policyholders first seek reimbursement from the travel service provider, such as the airline or cruise company, before filing an insurance claim. Sometimes, Moncrief says, an airline might want to give credit rather than reimbursement. She says insurers will encourage travelers to push for reimbursement before considering whether to provide coverage for such an event.

Insurers have made a number of adjustments in response to the pandemic. At the beginning, Moncrief says, travel policies didn’t cover medical care for pandemic illnesses. But that quickly changed.

Mark Friedlander, with the Insurance Information Institute, says different policies will contain different provisions, and “cancel for any reason” doesn’t necessarily mean “any reason.” He stresses the importance of reading and understanding the provisions of a policy before purchasing it.

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