COVID-19 and Travel Insurance: Here’s What You Should Know

Concern In Japan As The Covid-19 Spreads
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Amid growing fears surrounding the spread of COVID-19, governments have restricted non-essential travel to specific regions, while airlines have canceled hundreds of flights to profoundly affected areas. For many Americans, this sudden change can be devastating for upcoming travel plans as well as future travel. But what if you purchased travel insurance?

Research suggests that only six percent of travelers in the U.S. purchase travel insurance in case something goes awry with their trip. Still, holders of such policies now realize that insurance companies won’t be covering cancellations associated with the COVID-19 crisis if they purchased coverage after a specific date.

To be covered for coronavirus-related cancellations, you'll need to have booked your policy before late January, which is when insurers started cutting off coverage—or less likely, have purchased a plan that doesn't exclude coronavirus. If you booked your travel after your insurer's cut-off date, or if your policy has exclusions for pandemics and epidemics, it's unlikely you'll be covered for any events relating to coronavirus, including medical expenses, change of travel plans, and a variety of other things.

"Travel insurance plans, like many kinds of insurance plans, are what is known as a 'named peril plan,' meaning that they cover only things listed in the policy," explains Stan Sandberg, co-founder of TravelInsurance.com. "[COVID-19] would have to be a listed reason for that plan to provide cancellation coverage, and insurance carriers hadn't contemplated circumstances like this."

Does "Cancel for Any Reason" Insurance Protect Against COVID-19 Disruptions?

One way to make sure that you're adequately covered in the event a future trip is cut short or canceled altogether would be to opt for "cancel for any reason," or CFAR, insurance. The relatively new product initially gained popularity in Australia and is available from travel agents and several insurance companies. CFAR plans are now available in every state. (Up until March 6, New York residents could not purchase CFAR policies, but new guidance by the state's Department of Financial Services allows insurers to offer the coverage.)

In simple terms, a CFAR plan will give you the flexibility to cancel the trip and recoup a large portion of your money in case something unexpected pops up.

Sandberg recommends that people who either just recently booked or are planning summer travels now and thinking about booking their trip should consider a “cancel for any reason” plan as a backup to those unforeseen situations. 

He also says that the CFAR plans do offer a significant amount of flexibility with regards to timing, though there are some limitations. "You have to use it no later than 48 hours before your departure date, meaning if you are within 48 hours of departure, you can no longer cancel your trip," Sandberg says. If you find out that your flight is being canceled due to an outbreak a week ahead of time, though, you'd be able to make use of the plan.

Not surprisingly, companies offering CFAR covering are seeing a massive uptick in interest. TravelInsurance.com registered an increase of roughly 150 percent in CFAR policies during January and February 2020 compared to a year prior. 

"It's clear that customers are becoming fearful of traveling, but this fear may not affect whether airlines, hotels, and other travel providers will reimburse you if you've already booked a trip. The single best way to protect your travel costs is to buy travel insurance with CFAR added," says Jeremy Murchland, president of travel insurance provider Seven Corners

When Should I Buy CFAR Coverage?


You'll need to determine whether you think you’ll need the CFAR plan when you first book your travel, Sandberg says, as there are a few restrictions surrounding its purchase. You have to purchase the plan within a set number of days from when you made your first trip payment—e.g., put down a deposit on a hotel, a tour, or purchased flights. This date can be within 7, 14, or 21 days of your initial trip deposit date, depending on the plan you've selected.

What Does "Cancel for Any Reason" Insurance Cover?


So, how much will your CFAR plan cover if COVID-19 derails your travel plans? That all depends on how much your plan costs and the provider. Beware that the reimbursement under CFAR is not 100 percent, and most of the plans are going to get you around a 75 percent reimbursement. Some less expensive plans only reimburse 50 percent, but still offer some form of coverage and flexibility to travels.

Travel Insurance Companies That Offer CFAR Coverage

  • Seven Corners: Most of Seven Corners' policies allow for a CFAR upgrade, which covers 75 percent of the trip if canceled within two or more days.
  • Travelex: Travelex's Travel Select plan offers CFAR coverage as an upgrade—but it will raise your premium cost by about 50 percent. The policy covers 75 percent of the trip cost, and the trip must be canceled within two days of departure.
  • Squaremouth: Squaremouth's CFAR coverage covers between 50 and 75 percent and raises premiums by about 40 percent. Like the others, you must cancel two days or more in advance.
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