Cancellation Coverage Depends on Fine Print : INSURANCE: Fine Print

Sales of insurance policies to cover trip cancellation are on the rise. Yet the conditions affecting coverage are not always known by travel agents, who sell the programs, or by customers who buy the policies.

In some cases this lack of awareness of what is and isn’t covered can lead to nonpayment of claims.

One area of confusion is that some insurance companies sell their trip-cancellation insurance as part of a program that generally includes accident/medical and baggage/personal possessions coverage. Some insurers, however, allow you to buy single elements.

Sometimes trip cancellation as well as baggage coverage may be sold as an option in a tour operator’s package. Cruise lines also may have programs that have nothing to do with an insurance company.

No Reason Required

For example, Pleasant Hawaiian Holidays offers an option to travelers whereby payment of a non-refundable $25 provides refunds if you have to cancel before departure or cut short your trip, according to Jerry Healy, vice president-sales.

“Travelers don’t have to give us a reason--they can cancel by phone, and right before departure,” Healy said. “If the trip is interrupted, unused land arrangements are refunded on a pro-rated basis. But we can’t call this insurance, because we’re not licensed to sell insurance.”

Offering this kind of coverage where you can cancel for any reason, sometimes called a “waiver of penalty,” may be a growing trend.

“Everyone seems to be jumping into the trip-cancellation arena,” said Patty Campbell of All About Travel in Northridge. Campbell is chairman of the Assn. of Retail Travel Agents. “They seem to have discovered a new profit center, with many more tour operators offering this kind of coverage.

“In some cases you may be able to get a refund for any reason whatsoever. But it can be a gray area. All we know is what’s on the brochure, and that can be sketchy.”

Limited Information

Some tour operators/cruise lines may offer trip cancellation coverage as an option through a program with an insurance company, although the consumer doesn’t fill out an application with the insurer. Again, the amount of information on such key matters as what exclusions are available at the time of purchase may be limited.

“When we sell trip cancellation insurance on our own, we have literature to offer the client,” Campbell says. “Sometimes the client can complete the application in our office; sometimes he may take it home and use a self-mailer, or possibly can call a toll-free number and buy the policy using a credit card.”

However, she added, the trip-cancellation applications don’t say anything about existing conditions, one of the most confusing parts of this sort of insurance.

“That’s in the fine print,” Campbell says. “And travel agents are not insurance agents. They don’t understand the fine print, and I know I’m always worried that an agent may inadvertently misinform a client about coverage and it will come back to haunt us.

“But travel agents do have the responsibility for generally advising the client, which includes calling the insurance company with questions.”

Licensing Requirement

Some travel agents may be well-versed in trip cancellation insurance but others may not. In most states, including California, at least one agent at a travel agency office has to be licensed to sell insurance, according to Steve Volz, Los Angeles area manager of the Travelers Insurance Co. In some states, the travel agent has to take tests before getting a license, Volz says. California doesn’t require a test.

Travelers should understand that a basic premise of trip cancellation, and insurance generally, is to exclude foreseeable claims, says Volz. “People sometimes think they can cancel for any reason, which isn’t the case. There has to be a valid medical reason, supplier default, jury duty or unforeseen emergency like a traffic accident en route to departure.”

Some insurance companies have more stringent existing condition clauses than others.

“Consumers should read and fully understand the fine print before they buy a policy,” Volz says. “Unfortunately, many don’t, or not until they have a problem. And then it may be too late.”

Crux of the Matter

While different insurers may have variations on existing conditions, whether or not the condition was under control or manifests itself during the pertinent time period is generally the crux of the matter. Usually the pre-existing period starts from the day you bought the policy and ranges from 60 days to a year, Volz said.

Insurers generally check with the traveler’s doctor about any medical aspects of the traveler’s cancellation of a trip.

“It’s possible that if you’ve ever been treated for a particular medical condition, you might not be eligible to collect on a claim involving that condition,” Volz warns. “If you’re taking medication for a condition, that also might be considered reason for exclusion from coverage.”

While trip-cancellation insurance can be considered for any trip where you stand to lose money if you cancel or interrupt your journey (which takes in discount air tickets, cruises and tours with fixed dates), not everyone may be a good candidate as far as their health goes.

“If you have a chronic condition, you may not be a good candidate,” Volz says. “Any degenerative disease would generally not be covered under the pre-existing clause section of our policy.”

Agent’s Assurance

Consider the experience of Mr. and Mrs. Jack Couste of Redondo Beach, who bought trip cancellation coverage from their travel agent as an option of a tour operator’s package to Hawaii.

Unfortunately, the agent wasn’t sure exactly what type of protection was really being offered, and by whom (the tour operator or an insurance company). The agent assured the Coustes that they would receive a complete refund if they had to cancel.

“That’s how it was explained to me by our travel agent, and that’s the basis under which we bought this option,” Couste says.

“We even explained that my wife has had a bad back and there was a chance we might not be able to go. But we were told that if we bought this option, we would be covered.”

As it turned out, Mrs. Couste’s back acted up and she was told by her doctor that she wasn’t in sufficiently good condition to travel. Forced to cancel their vacation two weeks before departure, their claim was disallowed on the basis that Mrs. Couste’s situation ran afoul of the pre-existing condition clause.

Facts in Advance

Make sure you know what type of trip cancellation protection you’re buying. Can you cancel for any reason whatsoever, or are conditions imposed? If so, what are they?

Ask your travel agent about your chances of being covered in the light of your medical situation. Learn whether you’re covered if you have to cancel because of a problem of a travel companion or family member. And which family members? Everyone living at the same address? Children of any age? In-laws?

You can often call the insurers yourself on a toll-free number. Peggy Mertes, marketing supervisor for Travel Guard International, said, “You can get a general idea, but there are no guarantees of coverage. We still have to investigate. There is a lot of gray area, and we encourage both travel agents as well as consumers to call.”

Don’t buy more trip-cancellation insurance than you need, Mertes says. Take a look at the cancellation rules that concern your travel purchases. The closer you get to the departure date, the more stringent the cancellation rule. But some air tickets may be non-refundable regardless of the time period involved.

Travel Guard International sells $100 of coverage for $5.50. “If you have a $200 air ticket with a 50% cancellation clause, $5.50 would cover it,” Mertes says.

Trip Interruption

Another point to check is whether the policy includes trip interruption. Suppose you have to return home before your trip ends, as might happen if something happens to a traveling companion or a family member at home requires your presence.

Mertes suggests that travelers determine what the air fare would be for a one-way return from the farthest point on their itinerary.

“This should determine what coverage you should buy for this aspect of trip interruption, which is part of our trip cancellation policy,” she says.

“Suppose the one-way return fare would be $1,000. You should consider, depending on your situation, buying insurance for this amount, which would cost $55.”

The unused portions of the land arrangements, such as hotels and meals in a package, would be handled on a pro-rated basis, Mertes says.