A comprehensive travel insurance policy can protect you against the financial ramifications of unexpected calamities before and during your vacation. So why do so many travelers suspect that travel insurance is a scam?
Travel Insurance. Travel Protection. Travel Waivers. Protecting the money that you invested in your vacation can be confusing. These products sound similar, but their differences can financially devastate unaware travelers. Gena Tharp and her husband Lonnie discovered this in the most awful way.
The couple paid over $18,000 to Vantage Deluxe World Travel to book a once-in-a-lifetime European cruise. For an additional $2,500, they also purchased a pricey cancel-for-any-reason travel protection plan from their tour operator.
The Tharps had never been out of the country before, nor had they ever taken a cruise. But this adventure would be their first and last trip abroad together. Sadly, Lonnie was suffering from Stage 4 renal cancer.
Against the odds, Lonnie’s doctors had given him the green light to fly to Europe and take the river cruise. The couple knew it was a now-or-never situation. Unfortunately, it turned out to be the latter. The Tharps never took that cruise, and their travel protection plan provided no protection at all in the end.
In a heartbreaking turn of events, the couple arrived at the airport ready to begin their bucket list adventure, but instead of receiving the business class boarding passes they had anticipated at the Delta Air Lines check-in counter, they got terrible news. Vantage Travel had never paid for their flights to Spain, and as a result, the airline had canceled the Tharps’ reservation weeks earlier.
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Panicked but assuming this was all just a mistake that could easily be corrected, the elderly couple tried desperately to reach someone at Vantage Travel, but the number for the tour operator was unexpectedly disconnected.
The Tharps wouldn’t be heading to the business class lounge to sip some champagne before being whisked away to Spain. Instead, they were soon on their way back home, Gena in tears, confused and devastated by the situation. But the worst was yet to come. Days later, they learned the awful truth.
A Bankrupt Company Can’t Insure Itself
Vantage Deluxe World Travel had gone bankrupt, owing nearly $170 million to its customers and vendors. Refunds for canceled tours were out of the question as the company had no money to pay them. Initially, Tharp felt relieved that she’d splurged on that expensive policy, which she thought was travel insurance with an insolvency clause to protect against the bankruptcy of the tour operator. But it wasn’t, and it wouldn’t.
In a blow that took her breath away, she soon learned that she didn’t have a travel insurance policy at all. She and thousands of other unsuspecting customers had purchased a hybrid travel protection product created and self-insured by Vantage Travel. That policy had no underwriter and provided no protection or benefits to anyone if the company ran out of money—and Vantage Travel had run out of money years before Tharp and others bought that travel protection product.
By the time the Tharps rolled their suitcases up to the check-in counter at Boston’s Logan Airport, the riverboat they intended to sail on had long been repossessed, and there was no chance they’d be taking that cruise. But the company didn’t even have the decency to tell its unsuspecting customers.
Like Tharp, thousands of other customers thought it was wise to buy travel protection, which was marketed to them as something promising total peace of mind. Agents of the struggling tour company assured their commissionable targets they could cancel for any reason and their funds would be protected. Unfortunately, those bewildered travelers only read the details of what they bought after it was too late.
That oversight caused the complete loss of all the money the customers had spent both on the policy and the trips themselves—millions of dollars circled and then went down the bankruptcy drain. The thing is, this consumer catastrophe was entirely avoidable. Here’s everything those customers wished they had known about travel insurance, protection, and waivers so you don’t meet a similar fate.
Understanding What Travel Insurance Is (And What It Isn’t)
A comprehensive travel insurance policy can be a literal and figurative life saver, protecting you from the financial impact of specific covered events (often called named perils). The primary components of a good travel insurance policy are:
Cancellation Protection
No one expects to get sick, but many travelers don’t think about what could happen if they become ill or suffer an injury before a nonrefundable cruise or tour. If you’ve invested a large chunk of money into a trip, you’ll quickly understand the value of travel insurance if you’re forced to cancel a family vacation because someone in your party becomes sick or injured. A comprehensive policy can include other covered events, too, that could lead to the cancellation of your trip. These will be listed in the document and may include things such as sudden job loss, jury duty, and more.
Trip Delay and Interruption Protection
This clause protects you if a flight delay or cancellation causes you to miss nonrefundable parts of your trip. It can also reimburse you if you must interrupt your travels for a covered reason.
An Illness or Injury That Leads You To Seek Medical Treatment Abroad
Did you know most domestic health insurance policies don’t cover you abroad? Health care benefits are one of the primary reasons you need travel insurance if your trip takes you to an international destination. Health care abroad can be expensive, especially on cruise ships or in remote areas. If you don’t have travel insurance, you could be paying off your medical bills racked up on vacation long after your trip is over.
Being Medically Evacuated From a Foreign Destination
If you get sick or severely injured abroad and need to be medically evacuated, the cost can easily reach tens of thousands of dollars. You’ll be footing that bill if you don’t have medical evacuation coverage.
Your Luggage Is Delayed or Goes Missing on the Way to Your Destination
If an airline loses your luggage on the way to your international vacation, you might be surprised at the limitations of what you could be owed. The Montreal Convention limits the liability of airlines for lost and delayed luggage to just around $1,700 per passenger (not per bag). And that is the upper limit. The airlines rarely pay that ceiling. Not only that, but the reimbursement process can be long and drawn out. Travel insurance can fill in the gaps, and because of insurance regulations, the claims process can be much quicker than your complaint with the airline.
The Insolvency or Bankruptcy of the Travel Provider
This type of coverage is not always included, even in a comprehensive travel insurance policy. However, to be fully protected against a sudden shutdown of your tour operator, cruise line, or airline, the travel insurance policy you choose should include this clause.
Travelers should always keep in mind that their policies will spell out exactly what is covered and under what circumstances. Unfortunately, many travelers misunderstand the parameters of their policies and file claims that have no chance of being approved by their travel insurance company.
The first step in understanding a policy is to read the whole thing and pay particular attention to the inclusions and exclusions. Travel insurance policies are lengthy documents, so the insurance industry gives consumers a flexible time frame to thoroughly read through the entire policy after purchase. In most states, that look-over period is 10-14 days. If a traveler determines the policy does not provide the protection they want and need, they can cancel it without penalty for a full refund during that time. After the look-over period, the policy becomes permanent and is nonrefundable even if the traveler doesn’t use it.
When Should You Buy Travel Insurance?
You should purchase travel insurance as soon as you’ve booked nonrefundable aspects of your trip–like vacation rentals, airfare, rental cars, cruises, and more. Remember the cancellation protection in your travel insurance policy usually becomes active one day after purchase. So, as soon as you’ve got nonrefundable vacation dollars invested in your plans, make sure to protect them.
As a note, you can’t buy travel insurance after you already know that you need to cancel your nonrefundable trip. I’ve seen firsthand travel insurance claims rejected because the traveler didn’t buy the policy until after the covered event was in progress. This scheme will never work because travel insurance companies require documentation and evidence that you canceled because of a covered event that occurred when your policy was in effect.
When Do You Not Need Travel Insurance?
Remember, travel insurance can protect against the financial loss of nonrefundable dollars spent on your trip if you need to cancel for a covered reason. It can also serve as your temporary health care insurance. So, if you’re traveling domestically, you may not need a travel insurance policy, but there are several important things to consider before skipping travel insurance:
Are Any Parts of This Trip Nonrefundable?
Many vacation rental customers fail to understand that the owner’s cancellation policy listed in the contract is legally binding. If you book a pricey vacation rental and get sick or some other calamity befalls you, you can’t cancel and expect a refund. This is true for nonrefundable hotels and other aspects of your vacation as well–the same as on an international trip. So, if you’ve spent $5,000 on a vacation rental or anything else, the rules are the same: you should consider travel insurance. On the other hand, if you’re taking a road trip to visit and stay with friends or family, there probably aren’t any big expenses you would need to cover.
Can I Reasonably Absorb the Cost of Those Nonrefundable Parts?
Of course, if you’ve tallied up the nonrefundable portions of your trip and can confidently say you’d be okay with it if you canceled and lost it all, then you may not need travel insurance. In this case, you’re self-insuring your trip.
Will My Domestic Health Insurance Cover Me Out of State?
A critical aspect of any travel planning is ensuring you have health care coverage where you’re going. Accidents and illnesses happen, and medical treatment can be expensive. So before taking off on any trip, call your health insurance provider and find out if you will be covered. There are some limited health insurance policies and supplemental policies that will cover you abroad. Conversely, some health insurance companies won’t even cover you if you cross state lines (except in a severe emergency). So, be sure of your situation before deciding if you need travel insurance that includes healthcare coverage.
Is the Travel Insurance Coverage Through My Credit Card Company Sufficient?
Many premium credit cards like American Express Platinum and Chase Sapphire provide basic travel insurance to their members. I don’t recommend relying on this coverage for international travel; however, the protection may be sufficient for domestic trips. Always carefully review the limitations before making your decision.
Where Can You Buy Travel Insurance?
There are several ways to purchase a true travel insurance policy:
Directly From a Travel Insurance Company
Every major travel insurance company makes it easy to buy policies directly online. You enter your party’s details, the age of each traveler, the cost and the length of the trip, dates, and the state you reside in, and you’ll soon have a variety of quotes for various policies. That’s where you can see the named perils, the coverage limits, and the exclusions offered by that specific travel insurance company. Allianz, Seven Corners, Travel Insured International, and Nationwide are some of the best-known travel insurance companies.
A Travel Insurance Aggregator
These services can be great to compare various travel insurance companies. Like the online process of a direct travel insurance booking, aggregators like Insuremytrip and Squaremouth will gather all your personal details and coverage requests, and you’ll receive a list of multiple insurance companies and policies.
A Third-Party Insurance Broker
Your travel advisor may be in an official partnership with a travel insurance company and may offer your travel insurance as the final step of your booking. In this case, you’ll have a live person you presumably trust who can help guide your travel insurance decision.
A common mistake travelers make is not revealing pre-existing medical conditions on their travel insurance application. It’s crucial that you reveal any significant illness you’re being treated for or have been treated for in the recent past. If you don’t and need to receive medical attention related to that condition on your trip, you’re not likely to be covered.
If you or someone in your party has a significant pre-existing medical condition, you should always contact the travel insurance company or a broker directly for guidance.
What About Travel Protection Products?
The insurance industry is highly regulated, so only products sold by a licensed travel insurance company with an underwriter can be called travel insurance. That underwriter is what provides the safety net for the policyholder.
However, other products can provide limited protection that you may be offered from your cruise line, airline, tour operator, or booking sites like Expedia. These products are typically called Travel Protection, Travel Waiver, Air Ticket Plan, or similar and may have some travel insurance components like medical coverage. These are usually, but not always, less expensive than a traditional travel insurance policy.
However, the coverages and limitations can be vastly different. For this reason, it is crucial that you carefully read what you’re being offered, and understand what is covered, what isn’t covered, and under what conditions.
Another important detail travelers are often unaware of regarding hybrid travel protection products is that a successful claim is often paid in future travel credit with the provider instead of cash. Additionally, the airlines’ travel waiver products usually only cover the ticket cost and not your entire nonrefundable travel expenses. This can be a terrible shock to travelers who need to cancel their trip for a covered reason and learn that the nonrefundable cruise or tour they booked isn’t protected. This information is usually found in the fine print on the airline’s website. So, make certain you read through all the details of those products before relying on them to protect your vacation dollars.
The Bottom Line
Travel insurance and its offshoots come in all shapes and sizes, and deciding on a policy can be challenging.
The key to getting the coverage you want and need is to be savvy and use the look-over period to actually look over the travel insurance policy. Everything you need to know to protect yourself is contained in that document. If you read and understand it, you’ll know travel insurance is not a scam. Travel insurance provides protection for exactly what’s spelled out right in front of your eyes.
Unfortunately, it’s too late for the Vantage Travel customers who were misled into purchasing a product that offered neither insurance nor protection. Their money and dreams of adventure have been lost. Don’t let that happen to you. Make sure to read and fully understand what you are buying because you could end up in the same boat if you don’t.
