When the travel industry revs back to life and it’s safe to travel for leisure again (and that day will come, no matter how far off it feels today!), you can bet more people will be looking to purchase travel insurance. Stories of vacationers stranded abroad or having to cancel their dream trips without a refund will still be fresh in their minds. But could travelers really have prevented these scenarios by purchasing travel insurance?
Well, maybe. It mostly depends on the level of insurance, when the plan was purchased and when the pandemic became a “known event,” and any exclusions listed in the policy.
There are three general rules to healthcare cost coverage with travel insurance policies: known health risks when traveling to certain countries are either covered or they are explicitly excluded. The third option is that health costs while traveling are only covered if you receive the prescribed immunizations against known health risks before traveling. What sets epidemics and pandemics apart is their scale and speed of outbreak.
An epidemic is a disease outbreak in a wide geographic area that affects lots of people. A pandemic is an epidemic that has spread across countries and continents. In general, travel insurers tend to either cover or exclude both within policies. This means if you find one of these terms mentioned in coverage, it applies to the other as well.
What coverage might include
Policies that include pandemic coverage will most likely cover related medical expenses and non-refundable vacation cancelations. It might even include extra costs to get you home safely. However, even if a plan explicitly states that it covers pandemics, it’s probably only if you bought your insurance before a pandemic became a “known event.”
When it’s a “known event”
In general, a risk like a pandemic is considered a “known event” when it’s publicized in the media or recognized on official government websites. However, insurers' definitions can vary, so check with your insurer on how they define the term and when they cut off coverage for a specific event like a pandemic.
Think of it this way: if meteorologists had located, named, and plotted the course of a hurricane, an insurance company wouldn’t want to offer you travel insurance coverage for a hurricane if you were traveling to the city where the hurricane was predicted to make landfall!
Now, with the recent coronavirus outbreak, some insurance companies, travel companies, and air lines made exceptions to get people home as quickly and as cheaply as possible, regardless of insurance coverage.
If you want coverage that’s a little broader, look into Cancel for Any Reason (CFAR) coverage within a policy. The cost is usually an additional 50% of a basic policy price, which itself can average four to ten percent of a trip’s cost. Eligibility requirements for CFAR coverage include buying the policy no more than 21 days after your last payment for your trip; not canceling any later than 48 hours before your departure; and perhaps not being over a certain age or not having known health risks that would increase your chance of needing to cancel the trip. Reimbursement for your trip may only be 75% of prepaid, nonrefundable costs. CFAR coverage policies will vary by state.
So, purchasing travel insurance might not have helped travelers and their vacations affected by COVID-19. But that doesn’t necessarily make this type of insurance useless. The rule of thumb will still apply moving forward: if your pre-paid and non-refundable expenses are more than you’re willing to lose should your plans change, travel insurance is a good idea.