How to Buy Travel Insurance for Trips That Use Frequent Flyer Miles

We had an interesting question come to us this week – how do you calculate travel insurance costs when you are using frequent flyer miles, and are you covered for trip interruptions? In other words, if you are traveling using airline miles, how does it affect your flight insurance?

Travel insurance fees are calculated based on trip cost, so if you are using frequent flyer miles to purchase your air travel, you are reducing your trip cost (perhaps substantially) and that could leave you with less coverage.  Let’s get into the specifics so that you know what’s covered when you are traveling with miles.

Trip Cancellation

When you purchase an airline ticket with airline miles there is typically a fee charged by the airline for redeeming the miles, plus federal taxes on the ticket.  These expenses should be added to your trip cost because they could be included as part of a cancellation claim as the cost of your ticket.

There is also a fee to restore the miles to your account if you cancel the trip and don’t use them.  This is considered an administrative fee, and only certain policies will cover this sort of fee.  If you need help with this, please call our toll free number for advice on which policies will cover this administrative fee.  Again, not every policy will cover the cost to restore mileage to your account if you cancel your trip for a covered reason.

Trip Interruption and Travel Delays

You are covered for travel delays and trip interruptions even if you are traveling with mileage tickets.  With Travel Delay coverage, if you are stuck in an airport because of a weather delay, beyond the time limit specified in your plan, you can be reimbursed up to your coverage limits for the cost of a hotel room rather than spending the night in the airport.

Trip Interruption covers your unused non-refundable vacation costs and the transportation costs to either return home or resume your trip.  If you experience a trip interruption, for example being hospitalized during your cruise, and have to catch up with the cruise ship, or having to return home for a covered reason such as a family member becomes ill or passes away, you are also covered even if you are traveling with mileage, up to the coverage limits of your plan.   The important point here is up to your coverage limits.  If you have too low of a trip cost, your coverage limits will be too low to cover the cost of a ticket and/or the balance of your vacation.

Lets take a $4,000 cruise for example, and include $150 in fees to use mileage for airfare to get to the cruise.  You have a total trip cost of $4,150.   Half way through your trip, you have a trip interruption and have to return home for a covered family emergency.  Trip Interruption covers the cost of half the cruise that you couldn’t finish, and the cost of the airline ticket to return home.  The claim could be about $3,500.  The plan you bought has a coverage limit of 100% of travel costs for trip interruption.  In this case, you probably have enough coverage to cover the expense that you will incur.  But what if you are forced to return home on the first day of your trip.  Now you have a claim for the $4,000 cruise and the cost of the airfare to return home. This could total $5,500.  You likely don’t have enough coverage if you have extra travel costs.  This is one of the reasons why our Better and Best plans have coverage limits of 150% of your trip costs in the event that you have to cancel on the first day of your trip.

Lets look at another example.  You use mileage to visit a family member who is living in a foreign country.  You plan to stay at their house and have no hotel costs.  You use mileage to get your plane tickets and the total trip cost is $150 (the fees to get the mileage tickets).   You buy travel insurance with a trip cost of $150.  You have medical expense and medical evacuation coverage as part of the plan.  You are also covered for travel delays, and lost baggage.  Trip Cancellation will only cover the $150 for the tickets.  In this case, trip interruption coverage will be limited to 100% – 150% of the trip costs depending on the plan you buy.  So at most you have $225 of trip interruption coverage.   If you had to buy a ticket to return home in an emergency, the $225 will likely not cover the additional airfare.

Again, the Better and Best plans on provide coverage limits of 150% of your trip cost for Trip Interruption.  It is smarter to buy the plan with the better trip interruption coverage limit, and this is especially true if you are traveling on mileage tickets.  Also make sure to add up all your trip costs subject to penalties and insure the total amount of your trip to make sure your trip cost is accurate and your have adequate coverage.

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