What You Don’t Know Can Hurt You: Still More Insurance Gotchas

Travel insurance continues to be a source of frustration to many travelers. Following our earlier report on travel insurance problems, we’ve heard about still more insurance problems, mainly concerning unexpected denial of claims for trip-cancellation insurance.

Mental Illness

The first question came from a reader who couldn’t get an expected refund:

“I had to abort a trip in the spring due to serious anxiety attacks. I do not have a history of problems—this was a one-time thing brought on by a problem faced by my traveling partner. Nevertheless, my travel insurance (bought early and comprehensive) did not cover my cancellation. Is there anything I can do?”

The short answer to this reader is, “maybe.” You can’t claim for yourself on mental illness: According to John Cook, president of QuoteWright, travel insurance underwriters no longer consider mental illness a “covered” medical reason for cancellation unless you’re hospitalized for at least three days. Although some policies formerly did cover mental illness, Cook says that the industry faced too many claims and decided to stop covering such illness.

You may, however, have a claim if your traveling partner’s problem—the problem you say caused your anxiety attack—was due to a “covered” reason. Most trip cancellation policies pay off in the event you have to cancel because someone else close to you suffers an accident or illness, and traveling companions are specifically included, along with family members. Unless the traveling partner is also a relative, however, a claim would be successful only if the traveling partner is actually booked on the same trip as the insured traveler.

When Does the Meter Start on “Delay?”

Another reader questions the delay component of some bundled travel policies:

“On my trip from San Francisco to Palm Springs, my airline rescheduled my flight but failed to notify me, and I missed the departure. (I had called to confirm the night before and been told flight was on time but nothing about the schedule.) My original airline couldn’t get me on another flight to Palm Springs until the following day, so I decided to head for Oakland to catch a flight to Ontario, where I arranged for friends to meet me and drive me to Palm Springs. But that flight was an hour late, arriving after the rental car counter at Palm Springs had closed. This overall problem cost a fortune: a new one way ticket from Oakland to Ontario plus the costs of getting from one airport to the other. When I applied for reimbursement through my travel insurance “delay and interruption” provision, the agent told me that delay coverage didn’t kick in unless I’m delayed a full day. What are my options?”

The short answer here is, “Forget the travel insurance; instead, go after your first airline—the one that caused the problem.”

As I check the fine print in several policies, I can’t find any that say they specifically cover your situation. The typical delay coverage—which, incidentally, usually kicks in after five to 12 hours, not a full day—is designed to cover your local expenses while you wait out a delay, not buying alternative transportation. Some policies list “carrier-caused” delays as a covered reason, but they don’t specifically include schedule changes. Many policies also cover “missed connections,” but our reader didn’t really miss a connection. A few policies specify coverage for an “itinerary change,” but payout seems to be limited to reimbursement for the cost of a “separately booked event/activity not included in the cost of a cruise/tour” that the schedule change causes you to miss.

In our reader’s case, however, this really isn’t an insurance problem. If your first airline fails to notify you of a schedule change far enough in advance to allow you to adjust your own schedule —and can’t provide a replacement flight on its own line—it should arrange a flight on another line for you. If it doesn’t, you should hold it responsible for any costs you incur because of its negligence. Ask for reimbursement, with a 30-day time deadline, and take it to small claims court if it doesn’t offer a satisfactory response.

“First” Payment Really Means First

We recently heard from a reader who traveled to Europe on frequent flyer tickets, arranged—as is usually necessary—far in advance. Later, he booked a nonrefundable vacation rental and bought trip-cancellation insurance as soon as he made the initial payment on the rental to assure coverage of a pore-existing medical condition. Unfortunately, his condition flared up and he had to cancel. But his insurance company denied his claim: To take advantage of the usual waiver of the pre-existing condition exclusion, he should have bought the insurance at the time of the first payment, and the insurance company interpreted that to mean the time he paid anything for the trip—in this case, the taxes and airport fees for his frequent flyer trip—not when he later arranged the big-ticket rental. Even though the tax/fee payment was minor, compared with the rental, it was the first actual payment.

This situation poses a dilemma. If you make your frequent flyer arrangement early, you may not have a clue as to what your ultimate nonrefundable exposure might be. You must either build in a large margin of error in your cost estimate—and possibly overpay—or arrange your destination plans within a few days of the time you get your frequent flyer tickets.

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Avoiding a Scam

You may have recently read about the Prime Travel Protection Services scam that hit Florida travelers. Prime was selling what it called “travel protection” as if it were true travel insurance, and its sudden failure left travelers with neither their insurance nor their money. As far as I can tell, most of the phony policies were sold through travel agents, who bought into Prime’s promotions.

Although I haven’t heard many cases like this, such a scam is always possible. That’s one of the reasons I recommend buying travel insurance through a third-party insurance agency rather than from a travel agent, cruise line, or tour operator. You may pay more, but you get a lot more protections. And, as far as I know, the big online agencies handle policies from only valid and established underwriters.

Buyers Guide

As I’ve noted before, insurance companies—no matter how honest—will deny any claim they possibly can. They have experts in finding reasons not to pay off a claim. If a given contingency isn’t covered specifically in the fine print, it probably isn’t covered. My main suggestions:

• Buy through one of the big online agencies.
• If you have a question, call the agency and ask before you buy.
• If you have a problem, see if the agency can help resolve it.

For convenience, here’s a repeat of my list of online agencies:

1travelinsurance

G1G

InsureMyTrip

QuoteWright

SquareMouth (also operates as QuoteTravelInsurance)

Total Travel
Insurance

Travel Insurance Center

Trip Insurance Store