TRIP CANCELLATION INSURANCE

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Should you buy trip cancellation insurance?

August 8, 2010

I became ill recently -- not life-threateningly ill, but ill enough that our upcoming departure to Morocco was in question. 

I've never bought trip cancellation insurance.  Its always struck me as denoting a rather pessimistic view of the future.  In addition, I've always believed it is overpriced for what is offered and when I've reviewed the exclusions and fine print, its always seemed to me that there are more than enough exceptions to allow the insurer to weasel out of paying up, if and when the time comes to file a claim. 

But perhaps this is a slanted perspective -- although I've always been somewhat cynical about the need for various types of insurance, i.e., auto, homeowners, health, etc., I do recognize that for many people it can serve a rational goal.  After all, if you were run over by a truck, a good life insurance policy would most certainly help secure the financial future for your loved ones. 

But the key purpose of insurance, regardless of what type it may be, is to provide a financial buffer in situations when one simply does not have the resources available to cover whatever the loss may be.   For example, does it makes sense for Bill Gates, whose net worth is somewhere in the range of 35 billion dollars, to buy a one million dollar life insurance policy?  Obviously not, since a million bucks would be a drop in the bucket for Mr. Gates.

But I digress.  With respect to travel insurance, I've always felt that I could relatively easily absorb the cost of a last-minute trip cancellation, or, in a worst case scenario, i.e., a sudden illness or family emergency, the expense of heading to the nearest airport and heading home.  Believe me, the last place I would want to be in a hospital would be Cambodia or Laos!

Its also important to appreciate that in most situations, travel insurers are pretty clear that if you must cancel due to a "pre-existing" condition, there's a good chance that they will deny your claim.  The problem here is what actually qualifies as pre-existing.  For example, if you have diabetes and suddenly have a heart attack, which a known complication of long-standing insulin-dependent diabetes, there's a better than average chance your reimbursement for canceling would be denied.

On a related note, I should mention that there are different types of trip cancellation insurance.   At the low end, the simplest and cheapest policies simply reimburse you for out-of-pocket expenses if you are past the "drop-dead" deadline for canceling your trip due to personal or family illness or emergency.  This type of policy will also pay to fly you home ASAP should your trip be interrupted by a personal or family emergency. 

At the higher end, travel insurance policies may also include medical insurance -- these policies cost much more than a basic repatriation policy.  A policy that provides medical reimbursement for health care obtained abroad could be beneficial if one does not have any health insurance coverage at all.  However if you have a primary health insurance policy through, for example, Kaiser Permanente (in the U.S.), or through a provincial health plan (in Canada), its very likely that a substantial portion of your out-of-pocket medical expense which occurs while traveling abroad would be reimbursed by the plan.  (You would, of course, be well-advised to contact the plan immediately at the time you need the care.)

So -- should you buy trip cancellation insurance?  For our upcoming Morocco adventure with Intrepid Travel, I booked a low-end policy through HTH International http://www.hthtravelinsurance.com/index.cfm which essentially covers the cost of repatriation should we suddenly need to cut our trip short and return home.  However the only reason I purchased this policy is that Intrepid requires it as a condition of booking with them.  The cost is minimal, only $25 per person, and it only covers us for the 15 days we are traveling with Intrepid. 

If you want a policy that will have the fewest restrictions on coverage, you should probably purchase travel insurance immediately at the time you book the travel.  Reading the fine print is essential to determine what, if anything, will be excluded should you have to cancel your trip and file a claim.  Ultimately, I believe the decision as to whether to purchase a policy or not relates to your financial status, i.e., can you afford to take the loss on a last-minute non-refundable cancellation?  For example, if you've booked a high-end African Safari at a cost of $10,000 per person, and you can get a cancellation policy for a few hundred dollars, it may well be worth the peace of mind.  But for a low-end tour, if you're generally in good health, its probably not worth spending the extra money.