Travel Insurance Policies Not Paying Out Because of Pandemic

By Adriaan Brits Friday, July 3, 2020

According to one recent travel insurance case, a customer wanted to recover the loss she faced because her trip was canceled. When she approached her travel insurance company, they refused and claimed that they did not cover anything related to the global pandemic.

According to a survey, our citizens spend nearly $3.9 billion on travel insurance. Now, because of COVID-19, people are considering travel insurance more than ever. But can they be sure of its worth?

Should Travel Insurance Companies Pay Out Over COVID-19?

An executive of nonprofit consumer advocacy group Consumer Watchdog stated that, while travel insurance is something that we always hear problems about, it seems that it is not regulated as much as other lines of insurance.

The rules of travel insurance vary by state. According to the rules of many travel insurances, once a threat becomes a foreseen event such as a global health threat/issue becoming a named pandemic, it is not insurable unless you purchased the policy before the issue became foreseen. For example, if you get COVID-19, are prevented from traveling, and you had travel insurance before the date when the virus became a known threat, then the insurance company would cover your canceled trips.

Most of the well-known travel insurance companies use March 11 as their benchmark, which is when the World Health Organization (WHO) declared COVID-19 a global pandemic. However, those whose trips got canceled during the pandemic will not be covered in any case.

An executive director from the nonprofit organization Center For Economic Justice said that you have to read a lot of things to understand what travel insurance covers and what it doesn’t. Travel insurance is pitched as something simple, but it is a rather complex matter, according to the same executive. As the issue of unredeemable insurance policies increases, authorities have started investigating the matter.

“Cancel for Any Reason” Travel Insurance

People who wanted to cancel their trips due to the COVID-19 threat, but before global travel restrictions were put into place, were given an excuse that the travel insurance does not cover for cancellations out of fear. Additionally, they were told that this scenario would only be possible if they got “Cancel For Any Reason” insurance.

“Cancel for Any Reason” insurance is one in which people can cancel their trip at any time and get about 60-70% of their money back. This type of insurance is more expensive than normal travel insurance, and one expert travel advisor from Pennsylvania warns against this type of insurance policy for its costliness and its partial reimbursement rates.

Airlines Acting as Travel Insurance Brokers

Airlines often act as travel insurance brokers and offer insurance coverage — mostly by third parties — every time you buy a ticket. During the ticket purchase transaction, most carriers ask customers to buy insurance and then add the insurance policy's cost to the ticket’s cost. According to many customers, a lot of airlines offer insurance policies for an inconveniently higher price. Airlines earn revenue from the sale of these policies, but when travel company Allianz was asked about the terms that they have with major airlines, they did not disclose the terms and conditions.

According to many experts, this is a deceptive business tactic. They also suggest that it is always wise to ignore third-party offerings from these airlines. Customers can buy a travel insurance policy on their own and get it cheaper than what the airlines offer. Also, in the case of lost or damaged baggage, the Department of Transportation (DOT) makes the airline company responsible for reimbursing up to $35,000 on domestic flights.

Is Travel Insurance Worth It?

A lot of insurance companies cover trips that were canceled from the time of the purchase to the day of the departure for reasons such as sickness or bad weather. There is a free period after a travel purchase, usually lasting 10-15 days, when people can cancel and get a full refund of the premium, but after that window, there is no chance for that refund to happen.

During this global pandemic, people learned that they could get insured for things like accidents and medical emergencies, but not for pandemic-related matters. One solid way to make sure that your money is safe is to buy refundable tickets.

Carmen Balber of Consumer Watchdog claims that travel agencies are mostly set up for the people to lose. In other words, she believes that travel insurance is not worth it.

About the Author

Headshot for author Adriaan Brits
As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.

Related Articles