Does travel insurance cover the cost of a cruise line or a travel supplier going out of business?
If you were to ask this simple and straightforward question to nearly anyone who sells trip cancellation travel insurance, whether online or through a travel agency, you will get a definite “Yes” answer. You also might get an explanation of how long the policy has to be in force (typically 14 days after purchase).
Technically, this is the right answer, but you didn’t ask the right question, so this is the wrong answer for your situation.
How do I know you’ll likely get the wrong answer? Because I get the wrong answer myself on many seemingly simple questions. For 20 years I’ve called my competitors, emailed them and used their online chats as a secret shopper. I often get vague answers that tell me nothing no matter how simple and direct I am.
Back to Supplier Financial Default: You thought you were asking “Does travel insurance cover the cost of a cruise line or a travel supplier’s going out of business that I booked directly and not through a travel agent?“.
A normal person wouldn’t think to include the phrase “that I booked directly and not through a travel agent”. Unless you have read your policy or TripInsuranceStore.com’s FAQs, you wouldn’t realize using a travel agent is relevant for this coverage.
Here’s the right answer to your question:
Q. “Does travel insurance cover the cost of a cruise line or a travel supplier’s going out of business that I booked directly and not through a travel agent?”
A. No. You are not covered for Supplier Financial Default if you booked directly with the Travel Supplier.
Most people don’t know or understand that the Financial Default coverage is for the 3rd party. If you book a cruise directly with the cruise line, you are not covered for Supplier Financial Default because there is no intermediary to be the 2nd party. If you booked with a travel agent who, in turn, made your cruise’s travel arrangements, the travel agent is the 2nd party and the cruise line is the 3rd party.
In other words, Supplier Financial Default does not cover where you arrange / book your travel. For example, if you use a travel agency and it goes out of business. Ideally, the travel agency uses an escrow account to store its clients’ funds while the money’s in their possession. You are not covered for Financial Default for money the travel agency hadn’t paid to the travel suppliers.
Q. What is Supplier Financial Default?
A. A common definition of “Supplier Financial Default” is a complete suspension of operations due to financial circumstances whether or not a bankruptcy petition is filed. In other words, just the act of filing for bankruptcy or becoming bankrupt doesn’t necessarily qualify as a valid Financial Default claim. The 3rd Party (not who you booked directly with) travel supplier has to completely cease operations.
I hope this makes sense.
And, if you have any questions about travel insurance, call us Toll-Free at 1-888-407-3854 or email Steve (me), The Travel Insurance Guru, here or using steve [at] tripinsurancestore dot com.
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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