Coronavirus aka COVID-19. What is covered.

Recently there have been many questions asked about available travel insurance policies and how they are reacting to the novel Coronavirus also known as the COVID-19. The actual questions about the virus are very similar to the questions that were raised in the past relating to SARS and Avian Flu. They basically fall into three categories:

  1. What happens if I have to cancel or interrupt my trip due to the threat of being exposed to the virus?  The answer depends on the travel insurance plan that you’ve used. Trip cancellation coverage is a “named peril” coverage where only those perils that are listed by the insurance company and not limited by the company’s exclusions are covered. Basically there is no coverage if you cancel due to the threat of being exposed because none of the policies currently have that as a named peril. However, most policies include the peril of “quarantined” and would provide coverage if one was forced to cancel or interrupt their trip if they were quarantined.
  2. What happens if travel becomes prohibited to or from my destination?  Government action prohibiting travel is not a covered reason under any travel insurance plan.  
  3. What coverage do I have if I contract the virus?  It now becomes a sickness and the client could be eligible for benefits under the medical expense, trip cancellation, trip interruption, travel delay, or emergency evacuation coverages found in most policies. However, check the plan's exclusions to see if it excludes  an “Epidemic” or a "Pandemic" as those plans probably would not provide coverage if it was declared as either by a recognized health authority before the purchase of the insurance policy.
  4. Can I cancel my insurance policy and get a refund of the premium?  You have a right to cancel your policy within the "free look" provision.  The "free look" period is, depending on the plan, a 10 to 15 day period following the purchase of the policy where you can cancel the policy and receive a full refund of premium.  Once you are past that period, refunds are at the discretion of the insurance company.  Currently we are finding that our partner companies are being lenient and are either providing a full refund or a credit for the purchase of a future policy.

There is one exception to the two questions, the one about cancelling for fear of being exposed to the virus or the Government action – “Cancel for any Reason”(CFAR) coverage that can reimburse cancelled trips up to 75%.  Some companies offer CFAR as an additional coverage that can be added which allows a traveler to cancel for any reason not covered by the basic policy but there are conditions that apply concerning when the policy has to be purchased and whether a traveler has to insure to value.

Will travel insurance companies expand their coverage to include “risk of exposure” or Government action causing cancellation?  I don’t know.  Insurance companies have a very delicate balancing act in evaluating risk, widespread need, exposure to a single event that can cause catastrophic losses, and arriving at an appropriate premium.  But I would look for change to soon.  One thing I hope they will consider is changing their "free look" provision to include better clarification on whether or not they will provide a refund or credit if something like this happens again.