Ever wonder where Trip Cancellation coverage came from?

Trip cancellation coverage had it’s origins in the late 1960’s with a coverage called “Air Fare Refunder” coverage. Originally, the “Air Fare Refunder” coverage only provided protection for loss of air fare paid to go on a group or chartered flight. The coverage was limited to only cancellations or interruptions due to a sickness or bodily injury and pre-existing medical conditions (with no time limitations) were excluded. In addition policy had to be purchased no more than 30 days and no less than 21 days before departure. And to top it off coverage was strictly personal – meaning that only the insured person was covered for their own sickness or injury and did not have coverage if a family member got sick or injured. So, a husband could not cancel a flight if his wife got sick or injured even if both had purchased the coverage. Can you imagine that the spouse still had to travel or lose their fare. And forget about the non-traveling family member – wasn’t part of the policy.

The next generation of “Air Fare Refunder” policies included coverage for traveling family members provided the appropriate fare had been paid. This leap forward still had it’s short comings; coverage was limited to Insured, spouse, and children traveling together and the premium rating was more complicated than it is today. The perils were still limited to sickness or bodily injury (pre-existing excluded) but a family group could now be covered in the event one got sick and all had to cancel. However, it came at a price! A husband and wife didn’t pay just twice the rate of one but they paid over 5 times the rate for one! The logic: the risk was much greater because one sickness could cause two losses. How that translated to slightly greater than 5 times the single rate baffles me the same today as it did when I first asked the company actuary to explain 40 years ago. Here is a sample of a rate table from The Travelers old AT6 Air Fare Refunder Policy that was offered in 1971:

  • Amount
    of Insurance

  • Individual

  • Insured
    and Spouse

  • Insured,
    Spouse, and One Child

  • $200

  • $6.00

  • $10.00

  • $14.00

  • $300

  • $9.00

  • $15.75

  • $21.00

  • $400

  • $12.00

  • $21.00

  • $28.00

  • $500

  • $15.00

  • $26.25

  • $35.00

  • $600

  • $18.00

  • $31.50

  • $42.00

So the rate for a family of 3, each with a $200 ($200 x 3 = $600) airline ticket would be $42.00

After these humble starts travel insurance companies started to expand coverage. First by allowing other travel arrangements to be insured in addition to the airline flights and following that by adding coverage for non-traveling family members and than by adding additional perils to the coverage that went beyond morbidity and mortality and into such things as “default” coverage for airline and tour operator bankruptcy, natural disasters, being called to jury duty, and the big one, coverage for pre-existing medical conditions.

One thing is certain about travel insurance – it will continue to evolve and mature in response to the needs of the traveler.

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