I read today that Carnival Corp, the owner of the ill-fated Costa Concordia has stated that they are providing “lodging, refunds and other support to people affected by the accident”.  I instantly thought about what would have been covered by travel insurance if Carnival didn’t step up to the plate to do the right thing.

What could cruisers expect from their travel insurance depends on the coverage that they purchased and whether or not they were on the ship when it capsized or if they were scheduled for a later cruise.

Let’s deal first with cruisers who were aboard at the time that it capsized what are the possible benefits:

1. Medical Expense for injuries that were sustained during the accident or evacuation;
2. Emergency Medical Evacuation that resulted from injuries sustained during the accident or evacuation or sickness which are caused by the accident,
3. Trip Delay:  additional living expenses that are caused by the accident,
4. Baggage:  Lost or damage to personal effects and luggage caused by the accident,
5. Accidental Death:  death that results from injuries sustained during the accident,
6. Trip Interruption:  up to the cost of an economy ticket home and the unused cruise cost at the point of interruption. However, this one is less clear since none of the policies have a specific covered reason for a common carrier accident.  If a traveler is injured as the result of the accident than there is clearly coverage however, if they did not sustain injuries or receive medical treatment than there might not be coverage unless the insurance companies choose to interpret coverage to the benefit of the cruiser.
7. Travel Assistance:  emergency travel assistance to help make return flight reservations, replace lost travel documents, passports, and notify family members at home.

Now let’s deal with the cruiser who is booked on the Costa Concordia for a future trip:

1. Trip cancellation:  loss of non-refundable fees paid to participate on the cruise which now is cancelled because of the damage to the ship.  In theory there would be no loss of the cruise cost because the Costa is unable to fulfill the cruise however, if the cruisers airfare was booked separately than the airfare might be non-refundable.  Again this one is less clear because there is no clear “covered reason” dealing.

1. Cancel for Any Reason:  an option offered on some plans.  The cruiser must  qualify for coverage by buying the insurance within 1 to 30 days following their first trip payment and by insuring the full, pre-paid value of their trip.  The “cancel for any reason” option allows for any cancellation that is caused by a reason that is not covered under the trip cancellation coverage.  Usually there is a large copayment, 25% or more, that the cruiser would have to incur.

Bottom line is that travel insurance is valuable precaution regardless of the trip but you need read and understand what the insurance covers.

Resolution 1:  Make sure you qualify for pre-existing conditions coverage.  The biggest “gotcha” is the exclusion for pre-existing conditions.  Many plans offer a “waiver of pre-existing conditions” provided you buy the insurance early, within the required time period – usually 10 to 30 days depending on the plan following your first trip payment date.  We recommend shopping for coverage within 10 days of  your first trip payment in order to have the most options.

Resolution 2:  shop around for travel insurance.  There can be over a 300% difference in price between reputable plans for the same trip.  Buy the one that is right for you at the right price.

Resolution 3:  Remember the ABC’s of travel insurance;

Always shop around for insurance.   Find the plan that is right for you.

Be aware of policy limitations and exclusions.  Travel Insurance plans have limitation and exclusions – make sure you understand them.

Coverage for most travel insurance plans is “named peril”.  It is call “named peril” because it only covers those perils and hazards specifically listed in the policy.  So make sure the risk you need covered is listed.  Some plans offer “cancel for any reason” as an augmentation to the trip cancellation coverage however, unless you have a special need that isn’t covered by the basic trip cancellation perils than you should avoid this option.

Resolution 4:  Read and understand the plan before you buy it.  Ask a knowledgeable source If you have a question.  Best place to ask is with a travel insurance professional at a comparison web site.

Resolution 5:  Be aware of plans that seem too good to be true – because they probably are.  Plans are priced according to insurance company experience and expenses.  When you see a plan that is priced substantially less than other plans and it appears to have the same coverage than something is probably wrong.

Resolution 6:  Be aware of “opt-out” travel insurance offerings through airlines, tour operators, cruise lines, or travel agents when buying any type of travel that contains airfare.  The Federal Department of Transportation, beginning on January 24, 2012, will no longer allows airlines, tour operators, cruise lines, or travel agents to follow that questionable marketing practice which they believe to be  “unfair and deceptive”.

The United States Department of Transportation has established new rules governing advertising that go into effect on January 24, 2012.  The new rules establish higher standards for how airlines, tour operators, and travel agents advertise airfares.  Here are some highlights:

• Airfares will now have to be advertised inclusive of all fees including taxes.

• Post-purchase increases in airfares are prohibited unless they are due to changes in taxes or other governmental fees.

• Baggage fees have to be itemized and listed in conjunction with airfares.

• Opt-out options will no longer be allowed.

• Violations can result in a fine of $27,500.

How will this impact travel insurance?  Currently many airlines, tour operators, cruise lines, and travel agents automatically include the price of insurance in the final price.  In order to remove the price of insurance a traveler has to “opt-out” by unchecking the automatically included option.  The new regulation will change this practice to an “opt-in” practice where the cost of insurance will not be automatically included unless it has been shown separately and the traveler has specifically requested that it be added.   

Is this good for the travel insurance consumer?  In the opinion of this writer yes.  Many unsuspecting travelers will now be able to shop for the best travel insurance for their needs rather than having a third party decide what is best for them.

Part of the college student experience is often at least some traveling, whether it’s a week for spring break or a longer period taking online courses while abroad or in an exchange program. When you’re away from home, especially in another country, your risks increase for a wide range of issues from theft to injury or sickness. To help minimize these risks, you can easily pick up a travel insurance policy for college students. Travel insurance is a popular option with nearly 120 million Americans taking out coverage in 2009. However, before jumping into this decision, it’s important to keep in mind both the benefits and the possible disadvantages of signing up for a policy.

Benefits of Travel Insurance

Depending on where they purchase it, college students can benefit well from travel insurance. For example, insurance policies can include trip interruption or cancellation coverage. This provides a full or partial refund for trips canceled due to issues like weather, emergencies, or disasters. Travel delay reimbursements may also be part of your coverage with money reimbursed for needs like hotel stays or meals, which is especially important for college students traveling on a budget who many not have the finances to cover additional costs.

Many policies also cover aspects of travel like loss, damage, or theft of your luggage or personal effects, as well as lost baggage reimbursements for when you need to purchase items because your baggage was lost. Many plans offer medical and dental coverage in excess of your base student or private health insurance coverage if you need to see a medical professional while traveling. For serious issues, coverage may include emergency assistance reimbursement and even accident insurance for loss of limb or life due to a plane crash or accident while traveling. Coverage will vary widely depending on the policy and how much you pay for your coverage.

When to Get Coverage

Not every travel situation is going to require spending the money to get travel insurance. Travel insurance comes in both domestic and international forms. If you’re simply traveling within the country for a short visit home during a school break, or even internationally for a short trip, insurance may not be critically important. However, if you’re taking a longer trip as part of a study abroad, or you’re traveling to a part of the world where there’s a markedly higher risk for theft, injury, or disease, travel insurance may be worth the extra price tag.

Potential Downsides

Like any insurance, there are possible downsides to a college student purchasing travel insurance. One of the largest disadvantages is the added price. While costs can be as little as $50 for a week or $300 for three months, these are still additional expenses to airfare, room, and board. Students’ tight budgets can be impacted considerably by these costs, limiting what they’re able to do while traveling.

Making sure you find a trustworthy provider may be another issue, particularly as a student. Always look for a reputable company when buying travel insurance. Do some research and look for potential red flags in customer reviews, particularly from other college-age customers.

Finding a Policy

If you’re going to buy travel insurance, check with a couple of key sources first to ensure you’re getting the best deal before signing up for a policy. One great resource is your school’s study abroad office. Several organizations also specifically deal in student travel insurance.

Whether or not you need to consider travel insurance depends on the type of trip you’re taking, as well as how secure you want to be while traveling. The key is to determine what you want in an insurance policy, decide what you’re willing to pay, and then see if the right policy is out there for you.

written by Marina Salsbury

What is a “moral hazard”?  It is a term used in insurance circles that describes the subjective choices a person makes or could make because they have insurance.  Wikipedia describes it as:

In economic theory, moral hazard is a situation in which a party insulated from risk behaves differently from how it would behave if it were fully exposed to the risk.

Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to hold some responsibility for the consequences of those actions. For example, a person with insurance against automobile theft may be less cautious about locking his or her car, because the negative consequences of vehicle theft are (partially) the responsibility of the insurance company.

How does this effect travel insurance? It is a concept that guides insurance executives when designing travel insurance policies.  A good example of this is the clause found in many trip cancellation coverages that:

All cancellations must be reported directly to the Travel Supplier within 72 hours of the event causing the need to cancel, unless the event prevents it, and then as soon as is reasonably possible.

This is based on the insurance company’s concern that a traveler might act differently with insurance than they would without it and therefore incur higher cancellation fees and therefore cause increased claims for the insurance company.

Another classic case of “moral hazard” involves flight insurance.  It has been the motivating factor of at least one Hollywood disaster movie where the drama was created because a character bought flight insurance with the intent to blow up the flight over water so that his wife could receive the death benefit.

Another example of “Moral hazard” is the reason why travel insurance companies will not insure the monetary value of award tickets.  Company’s are concerned that it would encourage travelers to “cash” out their awards  which would result in increased claims.