Everything you Need to Know About COVID-19 and Travel Insurance for your Cruise

The cruise ship Grand Princess passes the Golden Gate bridge in San Francisco, California on March 9, 2020. It was held at sea to conduct tests for coronavirus and arrangements were made to offload passengers at the Port of Oakland.

The cruise and airline industries took a massive hit due to the COVID-19 outbreak. Millions of people around the world are affected as their dream cruise vacation plans for this summer are cancelled or delayed. The number one question on everyone’s mind is “Will my travel insurance cover my cancelled cruise?”
I was invited to speak with Doug Parker at Cruise Radio to answer this and many other burning questions. To listen to the full episode click below, or read the transcript under the audio link. 

Cruise Radio Interview with Dan Skilken President of TripInsurance.com – March 15, 2020 regarding Covid 19 travel insurance coverage

Doug: Joining me on the line today is the president of TripInsurance.com – Dan Skilken to answer some listener questions. Dan, welcome to the show!

Dan: Thank you for having me on. It’s been a crazy time!

Doug: Yeah, you can say that again. The first question comes from David: “Is travel insurance refunded when the cruise line cancels your cruise?”

Dan: Doug, this is a hot topic for us right now. We’re getting so many emails and so many telephone calls on a daily basis, that we are up until 1 AM, just trying to answer people. This is a really common question.

What’s happening right now? – the cruise lines are canceling cruises – and the most common thing they’re doing is providing people with travel credits for future travel. It’s great, I’m glad they’re doing that since it’s practical.

We’ve seen a trend of some people simply bailing on their deposits for cruises since they don’t have much invested in their travel plans. They cancel the cruise and don’t take any compensation, but then they turn around and ask us for a refund on the travel insurance even though they took a loss on their cruise deposit. 

What we must mention first to our customers when addressing issues like that is that all sites like ours, TripInsurance.com, don’t set the policy on returning, refunding or canceling travel insurance. All that is set up by the travel insurance companies.

By law, The Free-Look period in travel insurance is 10 days, although on our site it’s 14 days. So, if you cancel your trip insurance within the first 14 days of purchase, you will receive a full refund of the premium.   After that, it’s purely at the discretion of the travel insurance company as to whether or not they will refund a policy.

I can tell you that if there were any cancellation penalties paid by the traveler, any penalties at all, there is no way the travel insurance company will cancel the travel insurance and refund in full.

The insurance company won’t take the risk with the state governments and the regulations on insurance because refunding a policy when some penalties were paid by the traveler is a potential threat to the insurance company if a claim were to be filed. The State Regulators can come back to the insurance company and inquire why they cancelled and refunded the policy instead of facing the claim, regardless of whether the claim would have been covered by the plan. So the insurance companies simply don’t take the risk and don’t refund policies when cancellation penalties have been paid. 

This is what’s currently happening in many cases: if your vacation is postponed and rescheduled immediately, so the deposit from the cancelled cruise is applied to the new cruise, we’ll have some flexibility in rescheduling the travel dates in the plan. 

However, if the traveler simply takes the credit without planning out the new travel, since they have no idea what the world will look like in 6 months, then there’s a very good chance they will lose the travel insurance coverage. With that, the traveler will have to buy a new plan when they schedule a new vacation.  If it takes you some time to reschedule, or for the cruise or the airline to process your credit, please don’t worry.  We put the policy on hold and then update the travel dates as soon as you have finished making your plans.

Doug: Dan you hit on something a few minutes ago and I think it’s good that we would clarify this. TripInsurance.com sells major US insurance brands, correct?

Dan: Yes, from Nationwide and US Fire – these companies underwrite a lot of brands that are out there, on different travel insurance sites or sold through your travel agency, and they also underwrite commercial travel insurance being sold directly from the cruise companies.

Doug:  Debra has the next question: “I’m sailing in July, can I cancel my cruise and get a refund because I’m afraid I might get sick?”

Dan: I don’t know a single travel insurance product out there that will cover you for fear of traveling unless you have a Cancel-For-Any-Reason plan.

Cancel-For-Any-Reason plans have a feature you can get which allows you to cancel for an uncovered reason, including changing your mind because you’re afraid to travel.  Cancel-For-Any-Reason plans typically pay 75% of the cancellation penalties. 

Keep in mind, if you live in the state of New York unfortunately those plans are not available because the state of New York won’t let anybody sell a Cancel-For-Any-Reason policy to New York citizens. If you are outside of New York State you can buy a Cancel-For-Any-Reason plan.

Because of what’s going on with the virus, there are a few insurance companies out there that have actually pulled their Cancel-For-Any-Reason plans off the market. At TripInsurance.com we still sell Cancel-For-Any-Reason coverage and we recommend any of our customers buy this plan for their upcoming travel.

Purchasing Cancel-For-Any-Reason has to be done within 14 days of making your initial travel plans deposit. This includes placing a deposit on airline tickets, your cruise, hotel, etc. When purchasing a Cancel-For-Any-Reason plan you have to declare the total cost of the trip that will be subject to cancellation penalties, not just the installments you’re making. For example, if you’re buying a $4,000 cruise for a couple you’re going to have to declare $2,000 each. You can’t only declare the $500 deposit that you’re making when reserving the cruise.

No matter how you look at it, purchasing a Cancel-For-Any-Reason coverage is a very smart move because it will cover you in case you change your mind because you’re afraid to travel.

Doug:  What if you didn’t purchase a policy with Cancel-For-Any-Reason?

Dan: In this case, unfortunately you are not covered for fear of travel. The only exception to that rule, in which you would be covered is if the airlines shut down all air traffic to the cruise departure point. In this case, you would be covered.

As a matter of fact, we have a lot of customers who are taking cruises out of Italy right now. All air travel to Italy has been shut down, so those who purchased their travel insurance prior to air traffic shut-downs are eligible for coverage on trip cancellations. 

However, if your cruise was cancelled, but not your air flight (and all other air flights) then you would be in trouble because there are very few Insurance packages out there that will cover you in the event of a cancellation by the travel provider.

Doug: What are the biggest mistakes you’ve seen when someone purchased a travel insurance plan without Cancel-For-Any-Reason coverage?

Dan: Right now, the biggest mistake is probably the expectation that they’re covered in the event of anything, including fear of travel or rescheduling.

I strongly suggest people read their policies. If they do, they will find out that the policies are not written or structured in a way that they cover for a pandemic. Most policies are structured to avoid what I would call “mass group problems”.

A perfect example of a “mass group problem” is bankruptcy of The Cruise Company. Most policies sold by the cruise companies exclude coverage in that event because travel insurance companies don’t want everyone who booked with that cruise company to file a claim in mass.

This is why they exclude that risk specifically, otherwise the cost of the insurance would be too high.

The plans and policies that are sold on TripInsurance.com, however, are covering individual people, so the insurance companies are willing to take the risk of bankruptcy of a cruise line.

In summary, if you are purchasing a policy from a comparison site like TripInsurance.com you’re going to be covered in the event of a bankruptcy of the cruise line.

Curiously enough, I’ve never worried about that in the past. With what’s going on in the travel industry right now, bankruptcy of a travel supplier is a possible issue.

Since no plans are written in preparation for a pandemic, a lot of people are concerned.

We’ve had customers that have actually called us or emailed us and said: “I’m supposed to leave on my vacation in two days. What plan can I buy that would let me cancel and pay me back for my vacation?” 

Let’s be clear – there’s no product out there that will do that. It would be an equivalent of asking your insurance agent to sell you homeowners insurance that will cover the loss of a house that’s currently on fire.

With all of above said, we are strongly encouraging anyone who is taking advantage of the fabulous deals available right now to buy a Cancel-For-Any-Reason policy the minute they make a deposit on that cruise. You can find those plans in the Best category on TripInsurance.com. Spend the extra money on Cancel-For-Any-Reason policy so that you’re covered.

Doug: Our next question: “I was waiting for more than an hour on hold to talk to someone in the _______ insurance company about a refund on my mom’s cancelled flight. They said they won’t do it because the Coronavirus is not one of the reasons that is covered by the policy. The airline is only offering free rebooking at a later date and not refund. I am so mad. What’s the purpose of buying travel insurance to cover unforeseen circumstances if it doesn’t even work?”

Dan:  I’m sorry about your frustration. There are a lot of very frustrated customers out there right now in the travel industry and they have an expectation that no matter the reason for the travel Interruption, they will be covered by the travel insurance plan. 

Keep in mind, travel insurance plans have very specific, very carefully written provisions. It may come as a surprise, but they are not written to generate “Gotchas” allowing the insurance company to avoid paying the travelers.

I’ll be honest, I’ve been amazed at how wonderful the U.S. Fire and Nationwide have been with regard to claims and figuring out how to pay claims as best they possibly can while complying with the policy and the way it was written. They are not avoiding paying out claims, they are trying to figure out the best way to pay them. But by law, they can only pay for the claims in the way the policy was written.

Obviously, there is no policy that says it is going to pay a specific amount in a case of a pandemic or a Coronavirus. There are, however particular provisions written in these plans, for instance: if you are quarantined and you’re going to miss your trip most of the insurance plans have a provision for that. If you are quarantined on the ship and your trip is interrupted, you will be covered up to the limit of the plan for the extra costs of the travel that was interrupted, including your hotel after the cruise, your flights, etc. There is a provision for medical coverage abroad -so if you get sick overseas your medical will be covered. There are some provisions that will cover the temporary hotel if you can’t get a flight back and your travel is being delayed. 

As you can see, there are many provisions that will cover many of the circumstances caused by the pandemic.

In the case like our caller’s, however, where the airline is going to give him a credit, but he is cancelling the cruise because of fear – that is simply not written in the plan. This is why so many people are frustrated.

What’s concerning is the amount of customers who haven’t read their plan, and don’t really understand these provisions. They are turning in claims and those claims are getting rejected which makes them really angry. Immediately they think there were “Gotchas” in the plan. In reality the plan was never written to cover a pandemic.

Doug: There are a lot of claims about to be filled, since on any day there are about 95,000 people on board of a cruise ship. Is there a risk of a travel insurance company going bankrupt because they’re paying out all these claims?

Dan:  No. Many customers worry about the insurance company going bankrupt when they buy a travel insurance plan. Let me assure you, Nationwide and US Fire are huge and they insure a lot more than just the travel industry. They are rock solid financially, so don’t worry.

It is however, of course, going to be one of the least profitable periods or times for travel insurance out there as the claims ratio is going to be through the roof. That is why some of the insurance companies have pulled the Cancel-For-Any-Reason plan from the market. They are worried about that exposure. We, however, are still selling Cancel-For-Any-Reason on our site.

To answer your question, there is no danger of a travel insurance company going out of business.

Doug: Steve has the next question:  “If a person got coronavirus on the ship, will travel insurance continue to cover their medical costs after they got home since the illness was contracted while they were on vacation?”

Dan: For the most part almost all the travel insurance plans out there have been revised since the Affordable Care Act to only provide coverage for medical expenses that occurred during your vacation. So, if you contracted coronavirus on the ship or on some shore excursion, your medical expenses will not be covered when you get home. 

This has a lot to do with the structure of the industry and the medical insurance regulations.  Almost universally, travel insurance won’t cover your medical expenses after you come home and you’re going to have to file that with your regular medical insurance.

Doug: Next question comes from Debbie Parker: “I just booked travel insurance with my cruise and it has Cancel-For-Any-Reason. Do I owe them an explanation if I want to cancel my cruise for any reason?”

Dan:  That’s the advantage of a Cancel-For-Any-Reason plan. It lets you change your mind and not go or your trip and you don’t have to provide any reason – just tell them you are cancelling your trip and you’re not going and they will pay 75% of your cancellation penalties.

If you cancel for a covered reason, let’s say you got hurt, or you got sick, or you contracted the virus so you couldn’t leave because of the medical reason, the insurance company will cover 100% of the cancellation penalties, since you cancelled for a covered reason.

The true advantage of the Cancel-For-Any-Reason plan: you don’t have to specify a reason. If you are afraid to travel – don’t go. It’s a great reason to buy the plan.

Doug:  All right, last question for you I promise.  “What would my travel insurance policy cover if we were to get quarantined in my stateroom on the cruise?”

Dan: We’ve got a couple of things we should address here: First, if you’ve been quarantined and you are going to lose hotel and any flights, which are the second part of your vacation following the cruise, all of that will be covered if you get quarantined on board of the ship. Flights home, if you are unable to take them because you are stuck quarantined on the ship are also covered.

If you’re quarantined on the boat, the insurance company will cover the cost to get you home, up to the limit of the plan.

This is in fact a reason why we’re recommending to buy travel insurance for all the cruises now and in the future. 

Another very common question that we are asked is: “What if I’m quarantined on the boat or if I get locked in my cabin two days into the cruise and the rest of the cruise I couldn’t take or enjoy, will the insurance company cover that?”

First of all, quick note – you may get locked in your room not just because of the Coronavirus but also many other reasons, like a norovirus or if you have any kind of fever or start throwing up on the ship. 

The answer to whether you will be covered for the loss of the remainder of your cruise is no. The coverage is for the financial loss that will happen to your vacation based on quarantine. The insurance company will not cover a “sucky” vacation – a vacation that’s gone horrendously bad because you were locked in your cabin will not be covered. 

Our best advice is to delay the vacation if you get the credit from the cruise company and just pick another time to cruise and, of course, always make sure to buy travel insurance even if you can’t get Cancel-For-Any-Reason plan, don’t travel without the travel insurance. I certainly wouldn’t.

Doug:  I think you said it best earlier:  you don’t need it until you actually need it. We’ve been talking to Dan Skilken from TripInsurance.com. Dan, I know you’ve been extremely busy so I appreciate your carving out some time to chat with us this morning.

Dan:  Doug, it was my pleasure. If any of your listeners have questions, you can send us an email at support@tripinsurance.com. Please don’t wait on the phone – the phones have been absolutely crazy. We’re answering emails up very late so if you do have any questions send us an email and we’ll be happy to help!

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