Should I buy insurance from the tour operator?

We’ve heard that question time and again. Should I buy the travel insurance offered by the tour operator or cruise line? Most consumer advocates tell you not to, but why do they?

Here is a case right on point! Just a little while ago a tour operator from Worcester, MA by the name of Voyageur Educational Tours went bankrupt and ever since I’ve been reading articles about student groups from all over the US that won’t be going on trips that were already paid. One item I keep reading about is that even though client’s bought the travel insurance that was offered by Voyageur they probably won’t be covered!

According to one client:

I was sold optional insurance and I can’t identify the insurer. Guess Voyageur pocketed that along with my other $4200.00. I paid the extra $600 for single accommodations! I see keeping my insurance payment as criminally fraudulent.

Why isn’t it covered? Because travel insurance offered through a tour operator or cruise line does not contain “default/bankruptcy” coverage! Just that simple. Coverage is either self-insured by the tour operator or is provided by a licensed insurance company. If it’s self insured by the tour company than the funds that would be available to pay claims are general funds of the tour operator and would be tied up the second that the bankruptcy application was filed in court. More so the funds would be used to pay secured creditors first before any unsecured creditors(travelers). Where the insurance plan is underwritten by a licensed insurance company than it’s either not a “covered reason” or the plan specifically excludes the bankruptcy of the entity that sold you the insurance policy.

Moral of the story – always buy your travel insurance from a third party and make sure it includes default/bankruptcy coverage.

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