Some travel insurance policies cover financial damages incurred by covered travelers as a result of insolvent travel suppliers. However, travelers should be aware of how a travel insurance carrier classifies bankruptcy.
For bankrupt airlines, travel insurance coverage is often limited to the following:
- Trip cancellation and/or trip disruption when a passenger suffers unanticipated financial losses as a result of an airline’s cancellation of travel reservations owing to financial default or bankruptcy.
It’s worth noting that this insurance only covers cancellations, not delays.
In the event that their company’s activities are disrupted by bankruptcy, some travel insurance plans with ‘cancel for work reasons’ allow an insured traveler to recover their non-refundable trip charges.
How travel insurance plans define bankruptcy and financial default
Some travel insurance companies combine the terms ‘financial default’ and ‘bankruptcy,’ and define them as follows in their travel insurance policies:
- This is how financial default is defined: “a total shutdown of activities due to financial difficulties, whether or not bankruptcy protection is sought.”
- The term “bankruptcy” is defined as follows: “the filing of a petition in a court of jurisdiction for voluntary or involuntary bankruptcy.”
These distinctions are critical because, even if an airline has filed for bankruptcy protection, its services may not be fully halted; they may be operating at a reduced pace, and such delays would not be covered by your travel insurance coverage.
Limitations on travel insurance for bankrupt airlines
Travel insurance, as you may know, only covers events and situations that have yet to occur, but there are many indicators that an airline may go bankrupt long before it does. As a result, most travel insurance policies limit bankruptcy coverage to a financial default that occurs within a few days of your purchase.
Here’s an illustration: The financial default occurs more than seven days after the start date of your plan.
This means that the traveler must have obtained travel insurance far in advance of the declaration that an airline was in financial distress, and at a time when the bankruptcy was not anticipated. It’s worth noting that some ideas necessitate a lot more planning sometimes as much as 14 to 21 days ahead of time.
Does travel insurance cover company liquidation?
One of the key reasons to acquire travel insurance as soon as you book your vacation is to avoid situations like your vacation company going bankrupt. You can protect yourself against firms going out of business, as well as the cancellation of your vacation due to medical or other reasons, depending on the policy you purchase.
Does travel insurance cover travel agency collapse?
Most comprehensive travel insurance policies exclude insolvency of any travel agent or provider, while a few cover collapsed travel providers such as airlines but not travel agents.
What is not covered by travel insurance?
Baggage delay, damage, and loss plans do not cover all of your belongings. Glasses, hearing aids, dental bridges, tickets, passports, keys, cash, and cell phones are all common travel insurance exclusions. These things are sometimes covered, but only up to a particular cost limit, so if you have several expensive electronic items (such as a laptop, tablet, and mobile phone), you may not have enough coverage to cover the loss of all of them.
Does travel insurance cover redundancy?
The aftermath of “Superstorm Sandy” in the United States has once again brought attention to travel insurance and the exclusions that disappoint so many individuals when it comes time to file a claim. After a volcanic ash cloud grounded hundreds of planes in 2010, several insurers failed to pay, and they have regularly left passengers stranded when airlines have gone bankrupt.
According to the Association of British Insurers (ABI), its members paid out £416 million to policyholders last year. It was mostly for medical claims, which totaled £258 million, with lost and stolen property claims accounting for only £23 million.
However, readers of Money’s Bachelor & Brignall consumer section frequently complain about claims being denied. As a result, we asked the ABI to respond to a few of the most typical dilemmas.
A “state of emergency” has been declared in the area where I’ll be heading. Will my travel insurance cover me if I have to cancel my trip?
If it’s a hurricane or a “post-tropical cyclone,” it’s unlikely. According to Malcolm Tarling of the ABI, cancellation due to bad weather is “unlikely” to be covered; individuals should verify their policy wording as this varies between insurers.
In general, travel insurance covers cancellation due to particular occurrences such as illness, getting laid off, jury duty, having your car stolen, or having your home broken into that force you to stay in the UK.
There was an earthquake while I was on vacation. I’m fine, but the flights have been canceled, and we’ll have to stay in emergency lodging for the time being. Will the accommodation, new flights home, and expenses be covered by the policy?
According to the ABI, this will vary. For example, Churchill Insurance claims on its website that if you’ve already started your trip, you’ll be covered for travel and lodging costs associated with relocating if the property you’ve already booked and paid for is in an earthquake zone. The company will also pay the expense of sending you home if the earthquake makes it impossible to continue. While on vacation, I had to seek medical attention as a result of a falling limb during a storm. Will the treatment be covered by the insurance policy?
Yes. “It will cover the expense of emergency medical treatment as well as medical repatriation if necessary,” Tarling said.
While on vacation, I rented a scooter but fell off as it was heading downhill, requiring medical treatment. Is therapy covered by the policy?
Contentious. Many insurance coverage do not cover scooters. The ABI warns, “Be aware that some insurance may exclude motorbikes over a set cc.”
A pile-up on the motorway on my way to the airport in the United Kingdom caused a massive traffic delay, and I arrived at the airport too late to make my flight. Can I use my insurance to cover the cost of my flights and vacation?
This is something about which we get a lot of complaints. In these situations, policies rarely pay out at best, they will only pay out if your car was involved in the collision. Contracts state that it is your responsibility to be at the airport in plenty of time. If you travel by bus or train and the service is canceled, you have a better chance of collecting compensation.
The flight has been canceled owing to a volcanic explosion that has closed the airspace. (a) I’m in the United Kingdom. Can I use my insurance to cover the cost of my flights and vacation? (a) I’m traveling; would my insurance cover the expense of additional lodging while we wait for the ash to clear?
“Some policies will have a volcanic ash exclusion,” according to the ABI. “On (a), a claim will normally be filed against the airline, not under your insurance.” And (b) improbable. Your airline or tour operator may supply lodging, but your insurance company will not. Some plans pay a specific sum per day for delays, which might help with the expense.
I’m leaving for Egypt tomorrow for a vacation, but a terrorist bomb has just gone off in the area I’ll be visiting, and I’m afraid to go. Is it possible for me to lodge a cancellation claim?
Tricky. If the UK government offers special travel warnings against a certain place, some plans may cover you. In other cases, it may be classified as “disinclination to travel,” which is not covered, according to the ABI.
My son is taking a gap year, and I’m helping him get travel insurance. Will the policy pay out if he has to adjust his plans due to, say, civil unrest? Will it be financially feasible for him to return home in the event of a disaster, such as a tsunami?
Civil upheaval is not included in the policy. Make sure the wording is correct. Tsunamis may be the same, though some firms will provide add-on coverage for such events.
The airline with which I’m flying has declared bankruptcy. Will my travel insurance cover the cost of the flights?
According to the ABI, travel insurance is neither designed or priced to cover this risk. However, some rules have begun to include the term “SAFI” (scheduled airline failure insurance). Always double-check, and if it isn’t, think about purchasing it as an add-on.
What happens if travel agent goes bust?
Step 1: If you’re still in the UK, double-check your reservation. If a component of your vacation, such as an airline, fails, the tour operator should handle it for you. If the tour operator goes out of business, your vacation will most likely be canceled, and you will need to file a claim with the travel association.
Will I get my money back if my holiday is ATOL protected?
- If you were issued an ATOL Certificate when you booked your trip, read it carefully since it explains who is protecting your trip and what you should do if something goes wrong.
- You will not be disadvantaged as long as your vacation is safeguarded. We hope to reimburse you for the ATOL-protected portions of your trip that you did not use.
- You’ll need to figure out what type of ATOL-protected trip you were on.
- You will be asked to fill out a claim form. We’ll need a completed claim form, proof of the booking (including all documents supplied to you), and proof of payment for the trip (including bank statements, with any transactions not related to payments to the failed ATOL holder blanked out). We will clarify what information we require in the information we post about the failed ATOL holder.
- We will attempt to acknowledge receipt of your claim through email after it has been submitted.
- We strive to handle your claim as quickly as possible, and under normal conditions, we anticipate that it will take 28 working days from the time we receive it.
Due to the information we collect from the agent, bookings booked through an ATOL holder’s agent may take longer to process.
What can be claimed on travel insurance?
If a travel supplier delays your luggage during your trip, travel insurance can compensate you for the cost of essential items you’ll need until your luggage arrives, up to the maximum benefit amount specified in your plan. Keep all of your receipts for those purchases, since you’ll need them when filing your travel insurance claim.
What do you mean by “necessary items”? That depends on your specific situation and how long you’ve been delayed. When your suitcase goes missing for 24 hours, what do you do with a toothbrush, toothpaste, deodorant, and a change of clothes? That’s logical. But, during a six-hour baggage delay, does a single passenger require three fresh shirts and two pairs of jeans? Most likely not.
Does travel insurance cover cancellation due to Covid?
From the 17th of June to the 5th of September 2020, policies will cover travels to any international destination that the FCDO hasn’t advised against, as well as all or part of but required travel when the time comes to leave. They’ll also cover trips within the United Kingdom if current government guidelines allows it.
These policies pay for emergency medical treatment or transportation home in the event of a Covid-19-related illness while you’re overseas. However, under any other portion of the policy, Covid-19 or any related or modified form of Covid-19 is not covered.
If you purchased a policy between these dates, you will not be able to make a claim for costs incurred as a result of canceling or shortening your trip due to Covid-19.
Please check with your airline, tour operator, or travel company to see if your trip can be rescheduled. We can extend the coverage duration of your policy by up to one year from the date of purchase.
The following is subject to your policy’s terms, restrictions, and benefit limits.
Can I claim a refund on my travel insurance?
If you’re dealing with a UK company, you can demand a complete cash refund instead of a voucher or rebooking your vacation. You may not be eligible for a cash return if your company is not based in the United Kingdom.
If your holiday operator refuses to repay you and tells you to file a claim with your travel insurance or credit card (if they are not based in the UK), make sure you obtain it in writing. This is what you’ll need to offer your insurer or credit card company as proof.
If you are unable to obtain a refund from your travel provider, the following options are available to you.