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How Cancel for Any Reason Travel Insurance Can (and Can’t) Help You

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Once an event or a natural disaster such as an outbreak or hurricane hits, standard travel insurance won’t cover you—but CFAR coverage will.

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Once an event or a natural disaster such as an outbreak or hurricane hits, standard travel insurance won’t cover you—but CFAR coverage will.

In times of crisis, this travel insurance upgrade option may be your only saving grace—you just need to know the rules of engagement.

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We often don’t think too much about things like travel insurance and what happens if we need to cancel or change our travel plans until there is reason to cancel or change our travel plans (guilty as charged). As soon as there is a crisis or natural disaster that threatens to thwart our itinerary, that’s when we start taking the whole coverage thing a little more seriously.

However, once an actual event has unfolded, such as the current coronavirus outbreak, or a natural disaster has struck, they are considered known or foreseeable events and are no longer covered by most travel insurance policies. The exception is an optional upgrade to most travel insurance plans known as Cancel for Any Reason coverage, or CFAR.

True to its name, with CFAR coverage travelers can truly cancel their trip for any reason. However, there are important limitations and guidelines on how to purchase and use it correctly.

What is Cancel for Any Reason coverage, actually?

“The concept of travel insurance—like almost any insurance product—is to protect against the unforeseen or the unknown risks that are out there,” said Stan Sandberg, cofounder of TravelInsurance.com, a travel insurance comparison and shopping site.

Standard travel insurance plans are typically referred to as trip cancellation plans and 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.

Using the example of hurricane season, Sandberg explained that travel insurance provides a number of protections against trip disruption due to a hurricane. “But the key is you need to purchase the insurance before the hurricane becomes a known event or becomes a named hurricane,” he said.

If insurance providers didn’t have that caveat, then the moment a hurricane developed travelers would try to quickly buy an insurance policy so they could cancel their trip and get their money back. With the current coronavirus outbreak, travel insurance providers consider it to be a known event as of January 21, 2020. Travel insurance purchased before that date will cover disruptions resulting from the outbreak, but any travel insurance purchased after that date will not.

“The one exception to this is the CFAR [Cancel for Any Reason] optional upgrade,” said Sandberg. CFAR can in fact be purchased and applied to a trip regardless of whether there is an existing or foreseeable event.

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CFAR is typically sold as an optional upgrade to a standard travel insurance plan. And true to its name, 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 or a hurricane (or even if it's something as simple as you need to change your plans due to a non-covered work-related conflict or a nonurgent personal matter), if you purchase travel insurance with the CFAR upgrade, while you won’t be able to make any claims with the base insurance plan, you could still cancel your trip and recuperate some of your costs through the CFAR option.

Is there a catch?

If it sounds too good to be true, it’s worth noting that there are several limitations. The CFAR upgrade has to be purchased within 7 to 21 days of making the initial trip deposit (this varies by provider so make sure to know when the exact cutoff is). Thus, if you now want to add CFAR coverage to a trip booked months ago, you are out of luck.

Whatever you choose as your base travel insurance policy will include with it a range of covered reasons for which your trip can be canceled or delayed and that would cover up to 100 percent of the nonrefundable trip costs. Nonrefundable trip costs are any costs whereby the traveler isn’t getting a refund directly from the supplier, such as the airline or hotel. So, for example, standard trip cancellation coverage includes things like unexpected illness or injury and canceled or delayed flights.

If you opt for the CFAR upgrade, you won’t be getting a full refund of your trip costs. This is a way to get some of the money you paid for your trip back. There are typically two tiers of coverage: a slightly lower-priced tier that will reimburse travelers for 50 percent of their nonrefundable trip costs and a higher-priced tier that will reimburse travelers for 75 percent of their nonrefundable trip costs.

The trip also has to be canceled no later than 48 hours prior to departure—so no waking up the day of departure and simply deciding you don’t want to go (if you wake up and break your arm while rushing to get ready or have a family emergency, those things would likely be covered by your base plan).

Another massive limitation: New York State currently does not allow for the sale of Cancel for Any Reason travel coverage. If you want to know why, you’ll need to ask New York’s Department of Financial Services, which established this New York State rule. Thus, New York State residents do not have access to this option.

How much does CFAR coverage cost?

As mentioned above, CFAR coverage is sold as an optional upgrade to a standard travel insurance plan. What this means is that first, you need to purchase a travel insurance plan and then you add CFAR coverage to it.

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CFAR coverage typically costs between 5 and 10 percent of the total trip cost—and to get CFAR coverage you must apply it to the total cost of the trip. To get a sense of what that means in dollars and cents, Megan Moncrief, chief marketing officer for online travel insurance marketplace Squaremouth.com, said that so far this year, the average cost for a policy with CFAR coverage was $489, and the average cost of all policies purchased through Squaremouth was $291.

Those numbers are in line with the figures that Daniel Durazo, director of communications at Allianz Travel Insurance, provided. He said that travel insurance plans that include CFAR coverage are typically about 50 percent more expensive than those without them.

The price of the CFAR coverage is determined by two factors: the total cost of the trip and the age of the travelers. The higher the trip cost and the older the travelers, the more expensive the CFAR coverage is likely to be.

How do I buy it?

There are many ways to buy travel insurance. There are travel insurance search and booking sites, including Squaremouth and TravelInsurance.com, as well as individual travel insurance providers, such as Allianz and AAA. You can also often tack on travel insurance to the purchase of your flights when booking directly with an airline. And if you are working with a travel advisor, that person can book travel insurance for you as well.

How difficult is it to get reimbursed?

Submitting a travel insurance claim is an easy, straightforward process, regardless of the type of claim, according to Sandberg. You can start a claim by calling your travel insurance provider, or you can do so by creating an account online through a claims portal on the provider’s website. You will then need to fill out any required forms and submit whatever supporting documentation is needed—typically 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, Sandberg assured us.

High-risk destinations might not be covered

Before committing to any kind of travel insurance coverage, whether it’s a base plan or a plan that includes the CFAR upgrade, it’s always a good idea to call the insurance provider (or your travel advisor) to make sure that everything you think is covered will actually be covered for your exact trip to the exact destination you are going.

As a general rule, noted Sandberg, if a governmental agency has recommended against travel to a particular country or region, that country or region is likely not going to be covered by travel insurance. On TravelInsurance.com, those restrictions are baked into the search so that customers can’t actually search and buy travel insurance for destinations that aren’t covered.

Right now, travel insurance is extremely varied with regards to travel to China, for instance. While some policies may cover travel to some parts of China, but not to the Hubei provience (which is the epicenter of the coronavirus outbreak), others may not offer coverage for China at all due to the fact that Centers for Disease Control and Prevention has recommended against all nonessential travel to China.

Pick up the phone and ask all the questions so that you know exactly what you are investing in and what you can expect in return.

>> Next: A Practical Guide to Buying Travel Insurance