How Does Travel Insurance Protect You if Your Travel Supplier Goes Bankrupt?

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One of the largest and oldest travel agencies in the world has shut down due to financial insolvency. The Thomas Cook Travel Agency employed over 21,000 people in 18 countries, they had been in business for over 175 years. With 600,000 current and future travelers now in limbo many are wondering how their travel investment can be restored. They may not be able to go on the vacation they planned but they at least want their money back.

While this is somewhat of a unique situation, the UK government will be stepping in to assist travelers who are stranded or helping financially with those who haven't traveled, supplier defaults do happen and you need to know how to protect your travel investment for future trip. Please note, you must take action to protect your travel investment when you first make your travel arrangements because if you wait you likely will not have any protection.

In light of the Thomas Cook Travel Agency shut down because of financial insolvency, many people are asking how travel insurance would cover them and reimburse them for travel expenses. This post won't discuss every travel insurance policy available on the market but just the policy we offer in our agency. We offer Allianz Travel Insurance and their World Wide Travel Protection plan does provide coverage for Supplier Default provided certain conditions are met.

Before I get into this protection specifically let me just state that Travel Insurance is a Named Peril policy. This just simply means that there is a list of covered reasons in the policy that are specifically Named. If the reason you need to cancel or get reimbursed for your lost travel investment is not on the list then there isn't any coverage. Even policies that have a Cancel for Any Reason option are Named Peril policies with the exception that there is an endorsement added to the policy that extends coverage in other situations.

Not every loss is covered, even if it is due to something sudden, unexpected, or out of your control. Only those losses meeting the conditions described in this policy may be covered. (pg 1 of the Allianz policy)

In the Allianz travel insurance policy we offer, the two key coverage's are Trip Cancellation and Trip Interruption. Both sections have Supplier Default as a Named Peril. It says under #7, Your Tour operator, airline, or cruise line ceases all operations due to its financial condition, with or without filing for bankruptcy. If you read this one sentence you might be overjoyed that you have protection should your travel supplier default but you must know the conditions to which coverage would apply and the next paragraph gives four(4) conditions.

1. Your policy was purchased with 14 days of the date of the first trip payment or deposit. (This condition will vary by travel insurance company, read your specific policy for the required condition.)
2. The cessation of operations occurs more than seven(7) days after your policy's Coverage Effective Date
3. Your policy was not purchased directly through the tour operator, airline, or cruise line ceasing operations, or an affiliate of that entity, and
4. The tour operator, airline, or cruise line was included in our list of covered suppliers on your policy's Coverage Effective Date.

All four conditions must be met to have coverage.

Our recommendations are to purchase travel insurance immediately when making the deposit on your trip. If you postpone buying travel insurance and decide to buy it after 14 days(with Allianz) then you won't have protection should the supplier default. Likely, condition #2 won't come into play if you purchase travel insurance immediately upon depositing for your trip. Similar to other types of insurance that have "waiting periods" think of #2 as a "Waiting Period". 

Often people think it's easier to just purchase the travel insurance that is offered by the supplier but just note that coverage is more limited often times and coverage for Supplier Default will likely be excluded. For example, Celebrity Cruise Line's policy they offer through Arch Insurance Company only covers for four(4) Named Perils and specifically excludes Supplier Default. The insurance offered by Sandals and Beaches resorts is through Trip Mate and their policy excludes Supplier Default as a covered reason. You should always buy travel insurance from a third party insurance company that is different from the supplier you're using for your vacation to have the broadest coverage possible.

Our final recommendation is to only book travel with reputable cruise lines, tour operators, and airlines. Likely, these are on the list of covered suppliers which is the fourth condition that must be met to have coverage for Supplier Default. If you choose to book a trip with a lesser known company or one that's not on the list then you will not have protection against Supplier Default.

Final Thoughts

If you're considering several policies for your next trip ask for a complete sample policy to read through and review. If the sales representative won't provide this or doesn't have access to it then I would avoid that company. Also, most insurance agents(who sell auto and home insurance) don't sell travel insurance so you may need to seek out a few insurance agents in your state that sell a product or two. They are out there but you'll need to search them out. If you're working with a travel professional that offers travel insurance(they all should) they should be well versed on the product they offer. If you feel they aren't answering your questions adequately, seek out another travel professional for this valuable coverage.

We recommend you always purchase travel insurance for all of the valuable coverage it provides. If you have questions about travel insurance please feel free to contact us. We can help you throughout the US secure travel insurance for your next adventure.

 

Kristin and Richard Morris are the owners of Arizona Cruise and Travel in Gilbert, AZ, a Cruise Planners® franchise. They want to travel more and help others do the same. ACT on your travel dreams today! Call us at (602) 626-3740 or toll free at (888) 419-6640. You can visit our website at www.arizonacruiseandtravel.com and play around. Heck, you might as well search for your next cruise because you know you want to.

Richard and Kristin also own Southwest Premier Insurance Agency, LLC, a full service, independent insurance agency in Gilbert, AZ.