What Does Prepaid Mean?

by Steve Dasseos, The Trip Insurance Guru on February 4, 2015

What Does Prepaid Mean?

On April 18, 2012 I wrote a blog called “Don’t Waste $429 on Un-Needed Trip Cancellation Insurance“. I got so many questions about that one, on September 26, 2012 I wrote a blog called “You Cannot Get a Refund on Non Prepaid Trip Costs“. In both blogs I referred to “Prepaid Trip Costs” and I said “Prepaid means the cost is paid before you leave on your trip” in the latter post.

In addition to a trip cost being prepaid, it also has to be non-refundable on your departure date to be insurable by a trip cancellation travel insurance plan.

That should have been sufficient, don’t you think? It wasn’t, so after a few more years of Deanna, Becky, Kim and myself telling thousands of people what “prepaid” means, I thought it was time to write this.

The definition on Dictionary.com is:
verb (used with object), prepaid, prepaying.
1. to pay or arrange to pay beforehand or before due: “to prepay the loan.”

This, too, shouldn’t need to be said, which is exactly why I need to say it: If you are forced to cancel your trip due to any of the covered reasons, your prepaid trip cost must have been paid at least one day before the event happens that causes you to cancel your trip.

If you are leaving home on a Friday and you got hit by a cement truck two weeks earlier which resulted in your doctor telling you to cancel your trip, don’t pay any more money toward your travel arrangements. If you’re thinking “Who would be that dumb?”, I’ll tell you:

In March of 2009, someone called me saying they had gotten extremely ill and their doctor said they had to cancel their trip. I told them to go ahead and cancel all their travel arrangements right away. Three days later they called me and said that they were told by their tour company that since the Final Payment was due soon, they should just pay the Final Payment, which they did, because their travel insurance will cover it! I told them the tour company was wrong. They never would tell me if the tour company refunded that Final Payment.

In other words, if you prepay for the travel arrangement(s) before something happens that causes you to cancel and that prepayment is before your departure date and it’s fully non-refundable on your departure date you can insure the cost you paid put-of-pocket.

Let’s apply this definition to some common travel arrangements:

Cruise Prepaid and non-refundable often months in advance
Tour (Tour Company) Prepaid and non-refundable often months in advance
Airfare Bought With Cash Prepaid and non-refundable often months in advance
Airfare Using Airline Frequent Flyer Miles Counts as a $0 trip cost. Read this about FF Miles for more info.
Airfare Using Award Points Counts as a $0 trip cost. Read this about Award Points for more info.
Hotel Refundable, or held with a credit card, or Prepaid and non-refundable.
Rental Car Usually paid after returning the car. Sometimes is prepaid and non-refundable.

This list of common travel arrangements’ trip costs doesn’t include all the possible costs you could prepay, so it’s up to you to figure out what is and isn’t prepaid and non-refundable.

Remember, anything you can prepay and that is non-refundable on your departure date can be insured.

I hope this makes sense. If you want the right travel insurance advice, call us at 1-888-407-3854 and we'll help you figure it all out.

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