Travel Supplier Bankruptcy

“Over the weekend, one of the largest tour companies in the world, Thomas Cook collapsed, leaving hundreds of thousands of travelers stranded and many others left holding an empty bag for their already paid for but yet to be taken vacations” said John Cook, President of “Most cases where a travel supplier gone bankrupt the individual traveler is at the end of the creditor line as an unsecured creditor and will usually lose their trip investment after all of the secured creditors are paid.  Our advice has always been for consumers to protect themselves from possible travel disruptions due to supplier bankruptcies.” Travel Insurance is one consideration. But there are other steps that consumers should follow in order to ensure maximum protection. Consumers should:

  1. Buy travel insurance from an independent source rather than from the travel provider. As a rule, policies offered by tour operators, cruise lines, or airlines don’t cover their own financial default – bankruptcy.
  2. Check the insurance plan to see if they have a list of airlines or travel companies that they either will or will not cover. One company, Allianz, provides a list of companies they will cover while Travel Guard has a list of companies they won’t cover.
  3. Buy travel insurance very soon after they make a deposit. Default protection is mostly available if you purchase your travel insurance within 15 to 21 days of your initial deposit while some plans don’t have a time period.  The time period varies with each company and plan so our advice is to do it within 15 days to ensure that you have the maximum flexibility.
  4. Review the coverage carefully. Some plans will have a “waiting period” after the coverage is purchased and before the default coverage goes into effect. Usually it’s a 14 day period after you buy the insurance. Another reason to buy coverage early.
  5. Buy your trip or airline ticket through a travel agent. Some insurance plans exclude coverage if you purchase your trip directly with the travel supplier. To have the maximum flexibility you should purchase your trip through a travel agent, whether locally or online, rather than buying direct.
  6.  Always use a credit card for the payment of your ticket or trip. In the event of a default you have the right under the federal. Fair Credit Billing Act, to dispute your charge and have the credit card company remove it from your billing if you meet the requirements. This is fine if it happens prior to your trip but doesn’t help much if you are traveling at the time of the default. If that happens other airlines or tour operators might offer you an alternative on a standby basis but it can still result in delays and additional expenses that would be covered by many travel insurance policies.

These are ways that a consumer can manage their exposure to the loss of their trip investment. One can never eliminate all risks, but the prudent traveler can take action to minimize them.

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