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What are Your Insurable Prepaid Trip Costs?

Q. Are Frequent Flyer Miles, Future Cruise or Travel Credits, Credit Card Travel Awards Insurable? Click here to see all the details

A. Thanks to the Coronavirus, this has become a much more complicated answer. For all of our plans:

  • If you have a trip that was cancelled due to the Coronavirus and you were issued a Future Cruise or Travel Credit that is equal to the amount of money you had prepaid for the cancelled trip; and
  • You already have a trip cancellation policy for the cancelled trip that you are changing the dates on; and
  • The Future Cruise or Travel Credit is not for any additional bonus value (i.e. – the 100% not the 125% or 150% of the credit).

The Future Cruise or Travel Credits are insurable with the same policy if the Travel Credit was issued because your travel supplier canceled your trip due to the Coronavirus. Credits issued for other reasons may be insurable.

Your insurable trip costs are: Any trip costs that you pay prior to your departure that are subject to cancellation penalties if you are forced to cancel your trip or if you have to interrupt your trip after leaving home. The trip costs you insure must be paid before something happens to cause you to cancel your trip. If you get hit by a cement truck, it’s too late to pay any more trip costs. Instead, we’ll help you file your claim.

How do you insure airfare? If your airfare is 100% refundable, you don’t have to include its cost. Refundable means if you cancel your ticket you will get 100% of your money back in cash. If you receive an “E-credit” or any other reusable credit, your airfare is not refundable.

In order to determine what is non-refundable start with: “How much money, of what I had already paid, would I not get back as a cash refund if I cancel my trip just before I leave home?”

At the risk of sounding like I (Steve) am insulting your intelligence by re-stating what “prepaid” means, I cannot stress how important it is that you insure your correct trip cost. If you have cancellation penalties that are greater than any trip costs you prepaid and insured before you are forced to cancel or cut your trip short, those addiional penalties are not insured.

Figuring out your insurable trip cost can be complicated. One reason is some sellers give you the wrong advice about how to determine your trip cost. Here are five of my (Steve) 376 helpful blog posts:

  1. You Cannot Get a Refund on Non Prepaid Trip Costs – Hint: Any amount you don’t fully prepay prior to departure and before something happens causing you to cancel is not covered.
  2. What Does Prepaid Mean? – “Prepaid” seems to have lost its meaning. Hence this blog post.
  3. Rounding your trip cost up to the top of the range – Always round your trip cost up.
  4. How To Correctly Quote a Travel Insurance Plan – Don’t average the trip cost between all of you.
  5. We Average the Cruise Suite’s Cost Between Us – Here’s another blog post I wrote explaining why you shouldn’t average the trip cost between all of the travelers.

Here are some common prepaid costs you will forfeit if you were forced to cancel your trip at the last minute:

  • All payments, including deposits, for your travel arrangements including trip specific visas for countries you are visiting
  • Pre-arranged transportation (ever tried getting to JFK?)
  • Non-Credit Tuition for a class you’re taking (e.g., a cooking class in France). The cost of tuition if taken for college credit and / or part of a Study Abroad program is not insurable.
  • The rent you will have pay prior to your departure on the property you’re staying in (e.g., the Italian villa or Florida condo). It doesn’t matter if you are renting from a private party or a business. What does matter is that the rental agreement must have a penalty schedule showing your cancellation penalties.
  • Theater tickets, event tickets, Disneyworld passes, etc.
  • Non-refundable airline tickets

More about airline tickets: Changeable does not equal refundable. Refundable means that if you cancel you will get 100% of your money back in cash – not credits or vouchers.

Q. Can you just divide your total trip cost by the number of travelers and use the average trip cost to price the travel insurance and still be fully covered for all prepaid trip costs if you have to make a claim?

A. The answer is “No”. All plans use a per person trip cost to price their plans. If you average out your trip costs, you likely will under-insure yourselves. Plus, you will probably unintentionally void your Pre-Existing Medical Conditions exclusion waiver and Cancel For Any Reason coverage.

Read this: How To Correctly Quote a Travel Insurance Plan

Q. Why is it important to know about being subject to cancellation penalties or restrictions?

A. If you just insure the penalty and not the entire cost you paid for the trip cost, you will forfeit any plan benefits associated with having to insure the full prepaid trip costs. I don’t mean you would recieve a partial payment of those plan benefits – you would lose all of those plan benefits.

If the plan’s wording says that you must insure all prepaid travel arrangements that are subject to penalties, that’s what it means.

Q. Are Frequent Flyer Miles, Credit Card Rewards and Other Free Travel Awards Covered?

A. Since this is a complicated answer, click here to see all the details.

Q. Do Cruise Line Port Charges or Taxes need to be insured?

A. I myself (Steve) started a thread on Cruise Critic in January 2010 asking specifically if cruise lines’ Port Charges or Taxes are refundable. I received dozens of responses. The majority were “No, they aren’t refundable”. However, I also got responses saying “Yes, they are refundable”. It seems to vary from cruise line to cruise line.

So, should you insure Port Charges or Taxes? I don’t know. If you choose not to insure Port Charges or Taxes, I suggest you get, in writing, from the cruise line that they are fully refundable if you cancel at the last minute. Your risk is that if you don’t insure the full non-refundable prepaid trip cost, you may forfeit any plan benefit associated with having to insure the full non-refundable prepaid trip cost including, but not limited to, obtaining the Waiver of the Pre-Existing Medical Condition Exclusion and the Cancel For Any Reason option.

Here’s what are typically not prepaid trip costs:

  • Lodging costs that you pay after you arrive. See Steve’s blog post “Don’t Waste $429 on Un-Needed Trip Cancellation Insurance” or What Does Prepaid Mean? for a more detailed discussion.
  • The cost of meals
  • The cost of Trip /Travel Insurance itself
  • Day trips, excursions and other side trips you arrange after your trip’s departure
  • The cost of souvenirs, gifts or other items you expect to buy on your trip
  • Passports (some plans will provide coverage for replacement if lost or stolen during your trip.)

Also, Frequent Flyer tickets have a $0 trip cost. You may include the re-deposit fee in your insured trip cost if you would want the insurance company to reimburse you for it if you had a covered claim.

Why is Your Trip Cost Important?

The cost of a travel insurance plan is usually based on three factors:

  1. Your age(s)
  2. Your per person prepaid trip cost
  3. The length of your trip (from the day you leave to the day you return)

Insuring your full prepaid trip cost is very important when you want to cover Pre-Existing Medical Conditions. There are 4 rules to keep in mind when you want to cover Pre-Existing Medical Conditions:

  • With the exception of the IMG iTI and TravelSafe Classic plans, if you want the pre-existing conditions exclusion waiver, you have to insure at least your trip’s full prepaid cost (you can’t round it down). and
  • The person with the medical condition must be medically able to travel when you get your insurance and
  • You must get your travel insurance within the first 14 to 21 days after your first trip payment date or by your final trip payment date and
  • You have to insure your trip’s length

If you’re flying, taking a tour, cruise, etc. your initial trip deposit date is the first date you made any payment – including a refundable deposit.

If you’re driving, you can establish an initial trip deposit date by prepaying a trip cost (ie – hotel reservation) before you leave. You have to actually prepay it – booking a room on Priceline, Expedia or Orbitz is best.

Ready to Purchase? It's easy and safe to purchase online or over the phone - just call Deanna, Kim or Steve at 888-407-3854 or 507-214-3854.

PS - Read Steve's Blog or you may Subscribe to Steve's blog here

PPS - Even though TripInsuranceStore.com is the world's most informative travel insurance website, you are still responsible to know the coverage terms, conditions, limitations, and exclusions of your plan. No comments or explanations confirm or deny coverage. You need to refer to each plan's policy wording.

PPPS - The Trip Cancellation coverage begins at 12:01 a.m. on the day after the date the policy is purchased. All other coverages begin when you leave home for your trip when your departure date is in the future.

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