Your Vacation Budget Is Still at Risk — Here’s How to Protect It

More countries are lifting their COVID-19 restrictions, making it less likely that you’ll need a negative test to travel abroad. In the U.S., case numbers are dropping. And with that, one of the most compelling reasons to purchase travel insurance — the coronavirus pandemic — might feel like it’s gone away.

But if the past two years of pandemic pandemonium taught us anything, it’s that things can change really fast. With every new variant comes a risk that restrictions could return and borders could close.

And so, while many of the earlier pandemic-driven roadblocks to travel have been removed, there’s still a chance you might need to cancel a trip you’ve already booked and paid for. Or in the event that you test positive abroad, you might need to unexpectedly extend your trip to quarantine.

The reality is, there are few, if any, ways to protect yourself entirely from COVID-19. But you can protect your vacation budget and ensure you get your money back. Here’s how.

Read the change or cancellation policy carefully

The easiest place to start seeking a refund for a canceled trip is at the exact business you paid for the trip. From there, request your money back on its terms — but a smart money move is to know what the terms are before booking.

In general, airline change and cancellation policies have gotten far more flexible than they were pre-pandemic. Stingy past policies included a common practice where airlines would charge you money simply to change flights, on top of the price difference of the new airfare, and that change fee would sometimes cost more than the new flight itself.

In contrast, these days, it’s common to find airlines offering credits toward future travel for trips you no longer want to take. Sometimes you can even get an outright refund to your original form of payment, depending on the fare type.

But that’s not always the case. When it comes to basic economy airfare, don’t expect a refund or flight credit. Some hotels let you cancel at no cost but require advance notice of a few days, which won’t work if you test positive for COVID-19 the day before your trip.

Hotel cancellation policies often vary based on the type of rate you booked. Some rates are considered nonrefundable, while others offer cancellation windows and guaranteed partial or full refunds.

Pay attention to the cancellation policy of the company from which you booked, not just the travel operator itself. While your individual hotel or airline might have a generous cancellation policy, that policy might not apply to you if you booked through a third party, such as an online travel agency like Expedia or Priceline. Instead, you’re bound by their terms, which are almost always stricter.

Only book travel where you’re comfortable with the change and cancellation policy.

Purchase travel insurance

If the change and cancellation policy is a bit prickly for your taste, there’s another way you can plan for the unplanned: travel insurance.

Exact coverage varies by policy, but travel insurance typically reimburses you or can offer services when something goes awry. That might be a doctor’s visit in a foreign country that might not otherwise be covered by your existing medical insurance, or it could be extra hotel room nights should you decide to quarantine abroad after testing positive for COVID-19.

The cost of travel insurance will typically run from 4% to 8% of your overall trip cost, according to the U.S. Travel Insurance Association. Exact costs can vary based on many factors, including your age, the nature of the trip and what you want coverage for.

Consider Cancel For Any Reason coverage for even greater protection

When it comes to what’s covered and what’s not, travel insurance can have a lot of particularities. Plus, you have to meet certain conditions in order for a claim to be approved. For example, if you need to end your trip early, you’re typically required to provide proof of why you can’t continue, such as medical documents or a jury duty notice.

But that might be onerous or outright impossible, depending on the circumstances. If you can’t provide official proof — or perhaps you’re canceling simply because you no longer want to travel (maybe there’s an uptick in COVID-19 cases) — then you’ll need greater coverage. Consider adding on Cancel For Any Reason, or CFAR, coverage, which doesn’t require you to provide a reason for ditching the trip.

With CFAR coverage, you can usually expect a partial refund of 50% to 75% of upfront payments, according to the National Association of Insurance Commissioners.

Use a credit card with travel insurance benefits to pay for your trip

Here’s even better news: You might not need to actually pay for travel insurance. If you book your trip using a travel credit card that offers trip insurance as a perk and you need to change plans for a covered reason, then your credit card’s travel insurance — not you — will cover the difference.

Trip insurance is a benefit on many premium travel credit cards with high annual fees, but that single benefit can often justify the fee.

While these cards typically don’t have policies as wide-reaching as those of CFAR coverage, they do typically cover you for common reasons including:

• Injury, sickness or death experienced by the cardholder, a traveling companion or an immediate family member.

• Severe weather.

• Jury duty that cannot be postponed.

The bottom line

Even if you’re feeling bullish about travel, it’s generally still wise to get travel insurance for your next trip. Whether you purchase a generous Cancel For Any Reason policy or you rely on your credit card’s trip insurance benefits, having a plan can help you get compensated for nonrefundable expenses. If you’re not willing to pay extra for that coverage, then be diligent about booking refundable travel only.