Travel: How to cover the costs of disaster
(Reuters) - Whether your cruise ship crashes or you simply become too sick to step onto an airplane, there are ways to protect yourself when a trip doesn't go as planned.
More and more Americans are buying trip insurance, spurred to pay out for protection as events ranging from unrest in Egypt to Iceland's volcanic ash clouds have raised the profile of travel disruptions.
But even with more Americans buying travel insurance -- spending $1.8 billion in 2010, mostly for trip interruption coverage, up from $1.3 billion in 2006, according to the U.S. Travel Insurance Association -- that does not mean travelers have all the protection they need.
There are different types of coverage, and the industry has a reputation for finding reasons not to pay out - most commonly if a claim is based on a pre-existing condition, even if the consumer did not know he or she had the condition.
"A lot of people buy insurance they don't need. A lot of people need insurance and don't buy it," said Christopher Elliott, ombudsman for National Geographic Traveler and a travel consumer advocate.
If you're on a ship that sinks, for instance, the insurance generally would cover lost luggage and the contents - as well as the cost of a hotel, incidentals and travel incurred due to the unforeseen circumstances, Elliott said.
But what if you want to cancel a planned cruise because of fears after the sinking last Friday of the Italian cruise ship the Costa Concordia? Most policies won't cover that, said Elliott. Depending on the cruise line and destination, some travelers may be able to cancel a week or two before departure and still recover some of their costs. But after that window closes, the whole amount would be lost.
There is, however, another type of policy, appropriately called "Cancel for Any Reason," that allows just that. The cost could be up to 14 percent of the price of the trip, which would mean a $700 premium for a $5,000 vacation. Even those policies, Elliott said, won't return 100 percent of the your investment.
But the more expensive the trip, the more this type of policy should be considered, especially if the trip price exceeds $10,000 or the contract terms could result in substantial costs when making any changes. "It's an investment you don't want to lose," Elliott said.
A common reason for canceling a long-planned trip is when a family member takes ill, causing relatives to not want to be far from home for an extended period.
Elliott said it is extremely important to know what is covered and is not in these policies. A lot of travel agents sell policies without showing consumers the fine print, he said, and that's not OK. You need to do your research.
"These policies are so detailed. They pretty clearly define what is and what isn't covered," he said. "If there is an interpretation that can be used in a way to deny you, chances are they will do that. Travel insurance is full of exceptions, and you really have to pay attention or you can end up with a useless policy."
Here are a few things that are typically not covered unless a premium is paid for a Cancel for Any Reason policy: a change in financial circumstances; you decide it isn't safe to travel; bad weather (unless it actually prevents you from reaching your destination).
Elliott also cautions against buying "travel protection" rather than travel insurance. Travel insurance is regulated and consumers can turn to their state insurance commissioners to find out whether the carrier they are considering is licensed in their state, as well as have a place to turn to help resolve any dispute that might arise in an insurance claim. On the other hand, travel protection is not regulated and is not considered as worthwhile, he said.
And note that credit cards, even the ones with big annual fees that provide conveniences to international travelers (no foreign transaction fees, for instance), don't do much for you if your trip falls apart. They typically only include accidental death and dismemberment coverage, assistance finding help and coverage for lost baggage limited to a couple of thousand dollars.
(Editing by Lauren Young, Beth Pinsker Gladstone, Leslie Adler)
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