Travel insurance isn’t just for expensive vacations or long trips overseas. In my opinion, it’s essential for every trip, because you never know what might happen when you’re away from home! Recently, I've been asked several times about "Cancel For Any Reason" insurance, so I thought I'd explain why this type of insurance may not be for everyone.
As many of you may have discovered during our COVID-19 crisis, pandemics are not covered by most travel insurance policies. The exception is an optional upgrade to your plan known as “Cancel for Any Reason” coverage, or CFAR. Just as the name implies, it allows you to cancel your trip for any reason. So, if you have a trip planned to a destination that may end up experiencing a coronavirus outbreak, this upgrade will allow you to cancel your trip and have some of your costs reimbursed.
Standard travel insurance plans are designed to cover things such as the sudden bankruptcy of a travel company, an unexpected illness, or some kind of unrest or natural disaster that could disrupt your travel. There are also numerous add-ons or stand-alone policies that you can purchase to cover things like lost luggage, medical evacuation, and travel health costs.
In the U.S., the pandemic was declared on January 21, 2020. Everyone who had purchased travel insurance before that date was covered. However, after that date, any insurance purchased did not cover anything related to COVID-19. The one exception to this was the Cancel for Any Reason optional upgrade. CFAR can be purchased and applied to a trip regardless of whether there is an existing or foreseeable event.
If "Cancel for any Reason" insurance sounds too good to be true, it’s worth noting that there are several limitations. The upgrade has to be purchased within 7 to 21 days of making the initial trip deposit (this does vary by provider so make sure you know when the exact cutoff is). So, if you now want to add CFAR coverage to a trip booked months ago, you are out of luck. You should also know that the CFAR upgrade won’t give you a full refund of your trip costs. There are usually two types of coverage: a lower-priced policy that will reimburse travelers for 50 percent of their nonrefundable trip costs, and a higher-priced policy that will reimburse travelers for 75 percent of their nonrefundable trip costs. The covered trip also has to be canceled no later than 48 hours before departure—so you can't wake up the day of departure and simply decide you don’t want to go.
"Cancel for any Reason" coverage usually costs between 5 and 10 percent of the total trip cost. The policy price will vary depending on the state where you live, the price of your trip, and your age. In general, travel insurance plans that include CFAR coverage are usually about 50 percent more expensive than those without them.
CFAR coverage is sold only as an optional upgrade to a standard travel insurance plan. So you first need to purchase a travel insurance plan and then you add CFAR coverage to it. If something goes wrong on your vacation, submitting a claim is an easy, straightforward process. You start a claim by calling your travel insurance provider, or submitting a claims request on the provider’s website. You will then need to fill out any required forms and submit whatever supporting documentation is needed. They usually require proof of payment for the trip costs, such as receipts or credit card statements, or the bills for covered medical expenses. Once the claim is submitted with all of the required documentation, it can take as little as a week to receive a reimbursement check. Before committing to any kind of travel insurance coverage, whether it’s a standard plan or a plan that includes the CFAR upgrade, it’s always a good idea to call your travel advisor to make sure that everything you think is covered will actually be covered.
Another thing to note- if a governmental agency has warned against travel to a particular country or region, that country or region is probably not going to be covered by travel insurance. I always encourage my clients to speak to the insurance provider themselves and ask any specific questions that they may have.
Ultimately, whether to travel and what level of insurance to purchase is always a personal decision. If your total trip cost is low, you may decide to forego insurance or the additional CFAR coverage and self-insure (meaning you would absorb nonrefundable trip costs if you cancel). But, if your vacation is expensive, the additional fee for CFAR may feel like a bargain instead of potentially losing thousands of dollars if you have to cancel nonrefundable reservations.