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I thought I knew a lot about travel insurance until recently, when I learned something new. It was an expensive lesson.
My wife and I had booked an expedition cruise to the Arctic for our 30th wedding anniversary. A mechanical cancellation of a Delta flight delayed us by 25 hours, resulting in missing the sailing. Because it was an expedition cruise in a hard-to-access area, there was no opportunity to catch up with the ship.
As always, I had purchased travel insurance. As always, I assumed cancellation coverage was for any cancellation of a common carrier resulting in you losing non-refundable deposits. I also assumed that purchasing “travel interruption for any reason” coverage for 75% of the trip cost meant just that, for any reason. Unfortunately, I had not read the 48 pages of fine print that would have revealed my assumptions were wrong.
My expensive lesson did not end there.
The insurance company required the airline to provide a written statement of the reason for the cancellation. When I received this form, it listed the reason for the cancellation as “late arriving aircraft.” I’ve seen this lack of clarity multiple times, and I’ve been indignant about it, assuming it was due to airlines’ not being responsible for providing passengers with accommodations if the delay was caused by weather.
I let the airline know I didn’t appreciate their dishonesty. I also made a point of letting the insurance company know the cancellation was not due to weather, but to a mechanical delay. This was before I understood the financial implications of my righteous indignation. Had it been a weather cancellation (almost always covered if the delay is more than a few hours), we would have been fully covered. I learned cancellations due to mechanical issues are not always covered, and ours was not. Staying quiet and letting the airline’s reason speak for itself could have saved me many thousands of dollars.
Does this experience change my recommendation to purchase trip insurance? Not at all.
The biggest reason to have this insurance is for the medical and evacuation coverage, which is not covered by most US health insurance policies. The costs of medical attention or air evacuation home because of a serious illness or accident overseas can mount quickly into the tens, even hundreds of thousands of dollars.
A second reason is in case you become ill before a trip. This is especially important if you will lose significant non-refundable deposits, such as cruise fares, prepaid lodging, tuition, or event tickets. The few trips I’ve had to cancel over the years were due to illness, and having this coverage paid off.
I’ve also used the trip interruption coverage several times when a serious delay in a cruise departure required us to pay for additional lodging and transportation. I’ve collected when delayed baggage required my family to purchase clothing and necessities. Once, when our baggage never did catch up with us, we collected the coverage amount for lost baggage.
I certainly intend to buy travel insurance the next time I travel out of the country. I strongly recommend that you do the same—and verify that you actually have the coverage you assume you are purchasing. Make sure that a mechanical delay of six hours or less is covered for both cancellation and trip interruption. If you purchase “travel interruption for any reason” coverage, be sure you understand their definition of “any.”
Adequate travel insurance can save you stress, hassle, and money. Especially when, learning from my costly mistake, you clarify the details before you buy. Next week I’ll cover some tools to help you do exactly that.
Rick Kahler, MS, CFP®, CFT-I™, CeFT®, CCIM, is the founder of Kahler Financial Group, a Rapid City, SD-based fee-only Registered Investment Advisor.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.