WARWICK, R.I., March 9, 2020 /PRNewswire/ -- InsureMyTrip analysts predict that growing uncertainty over the long term financial impact of coronavirus, on the travel industry, will spur travelers to seek "financial default" coverage as a precautionary measure, in the event their travel supplier becomes financially insolvent. The International Air Transport Association reports that global airlines could lose up to $113 billion in sales if the coronavirus continues to spread.
"Buying travel insurance is critical in order to protect your financial trip investment in the event a travel supplier ceases operations and your trip is in jeopardy," says Travel Insurance Expert Meghan Walch. "We have already seen a few airlines fold in the past few weeks. We expect the growing financial instability, due to coronavirus, to potentially impact other travel suppliers in the weeks to come."
Financial Default Travel Insurance Coverage
Financial default coverage is already included in many comprehensive travel insurance plans. This specific coverage is designed to help travelers in the event their travel supplier has stopped business operations due to financial reasons.
Travel suppliers that may fall under this category include:
- Cruise lines
- Tour companies
- Resorts or hotels
Usually, airlines, cruise lines and tour companies are the kind of suppliers that financial default would be covered under a travel insurance plan. Financial default coverage reimburses in-full only if the traveler is unable to make alternate arrangements to continue on with travel plans. If a traveler is unable to book another flight, for example, benefits would then be adjusted according to the specific terms of the policy.
Clarifying Financial Default
Financial default is not the same thing as bankruptcy. While some travel insurance plans may also provide coverage for bankruptcy, most offer only financial default benefits.
In the case of bankruptcy, the company has entered into a legal process with the goal of resolving its financial difficulties and it may not stop providing services.
In a financial default situation, the company ceases to provide any services and stops all operations with no hope of repairing the financial damage. Knowing the distinction between these terms can help avoid any stress during the claims process.
Also, some plans will not cover the financial default of an agency from whom you purchased your land and/or sea arrangements. Typically, the plan will cover financial default of the cruise line, airline or tour company with which you will be traveling. Travel agencies are usually not included.
Financial default coverage is considered a time-sensitive benefit. This means it is only available within a specified period of time after making an initial trip payment. This time period varies by plan and provider, but is typically around 10-14 days. Coverage must be purchased prior to any announcement of financial issues made by the travel supplier.
In addition, policyholders may be subject to a waiting period after your policy goes into effect. If that's the case, most plans will not allow benefits to go into effect until after the waiting period has ended.
Finally, some companies only offer coverage for the financial default of select travel suppliers. Contact travel insurance companies directly for questions about a travel supplier's eligibility.
Travel Insurance Expert:
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