Thinking about taking a trip this summer? You’re not alone. As more Americans are vaccinated and certain pandemic restrictions lift, nine out of 10 of us plan to travel in the next six months, according to the U.S. Travel Association. And as eager vacationers begin to emerge from pandemic hibernation, travel insurers are anticipating a heightened demand for their policies, with some making significant tweaks to the coverage they offer. Here’s what’s happening.
- Travel disruptions caused by the COVID-19 pandemic have spurred new interest in travel insurance, especially now that stay-at-home restrictions are being lifted.
- Some insurers have added specific, pandemic-related coverage to their policies.
- Cancel for Any Reason (CFAR) coverage is also becoming popular, despite its cost.
Disrupted Travel Cost Consumers Big in 2020
Scuttled travel plans due to the COVID-19 outbreak left many travelers with heaps of unexpected expenses during the past year.
Half of U.S. travelers without travel insurance had to pay fees and other costs that insurance would have covered, claims a new survey report from battleface Inc., an international travel insurtech. Not surprisingly, the most common charges stemmed from trip cancellations, changes to travel dates or times, and costs associated with lost or delayed luggage.
Yet, other evidence indicates that consumers who had purchased travel insurance also faced costly denied claims and exclusions during the first wave of pandemic-related travel cancellations last summer, according to a report in The New York Times.
Sasha Gainullin, CEO of battleface Inc., says COVID-19 sparked a dramatic and lasting shift in the way Americans perceive travel insurance. In fact, he suggests buying insurance for any kind of trip soon “will be as normal and ingrained in the traveler’s mind as selecting a seat for a flight.”
That prediction is echoed by many in the travel insurance industry, which continues to evolve its products to address consumers’ pandemic pain points as the summer season approaches.
Travel Insurance: Must-Have or Nice-to-Have?
Travel insurance is a type of “named perils” plan, typically covering only the specific risks listed in the policy. Claims due to known, foreseeable, or expected events, epidemics, government bans, warnings, travel advisories, or fear of travel generally aren’t covered under a standard policy.
The National Association of Insurance Commissioners says that travel insurance generally costs between 4% and 10% of a trip’s price. So, for a trip with a $5,000 price tag, a policy could range from $200 to $500, depending on the company and the coverage. Pre-pandemic, Americans spent nearly $4 billion annually on travel insurance, according to the US Travel Insurance Association.
By March 2020 many travel insurance companies had stopped covering medical or trip cancellation expenses related to COVID-19. Soon after that, however, some insurers reversed course and now include COVID-19 illness, quarantine, denied boardings, or destination surges as covered reasons to cancel or interrupt a trip, or to seek reimbursement for emergency medical care.
CFAR Becomes a Popular Add-On, Despite Cost
At the same time, pandemic uncertainty has led to a noticeable growth spurt in Cancel for Any Reason (CFAR) insurance, which some insurers now offer as an optional upgrade across their entire range of travel policies. (CFAR is just what it says: Insured travelers can cancel for any reason they want—including fear of traveling due to the virus.) However, CFAR, which reimburses 50% to 75% of prepaid, nonrefundable trip costs upon cancellation, can add considerably to a policy’s cost.
Today, about 27% of travel insurance purchases now include the CFAR upgrade, compared to 19% in 2020, according to data compiled by Squaremouth Analytics, the research arm of travel insurance comparison site Squaremouth. Prior to the pandemic, that figure was around 8%.
In addition, for summer trips this year, nearly 35% of all purchases on its site involved policies specifying “Coronavirus Cancellation” or “Coronavirus Medical” benefits, Squaremouth reports.
The Bottom Line
The coronavirus pandemic has spurred interest in travel insurance, particularly policies with Cancel for Any Reason (CFAR) provisions. But despite the new enhancements, some policies may still not cover claims due to government travel warnings or advisories, among other exceptions. So before you consider buying a policy make sure it covers the specific risks you’re concerned about. Investopedia recently published this list of the best travel insurance companies.
Also bear in mind that you may already have some travel coverage as a credit card benefit or as part of another insurance policy.
Originally Appeared On: https://www.investopedia.com/travel-insurance-becomes-hot-commodity-in-forever-changed-pandemic-era-5181165