Travel Insurance Coverage Limits & The Volcano In Iceland


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Home Page > Travel > Hotels > Travel Insurance Coverage Limits & The Volcano In Iceland

Travel Insurance Coverage Limits & The Volcano In Iceland

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Posted: May 03, 2010 |Comments: 0
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Most of travelers coming from or heading to Europe last week probably didn’t think, “Does my travel insurance cover volcano eruptions?” when they headed to the airport last week.

However, the answer to this question has become a matter of the utmost importance to the millions of travelers stranded by the eruption of Iceland’s Eyjafjöll volcano.

With volcanic ash clouds shutting down airports across northern Europe, knowing thy insurance has become one of the only protections against a long camping trip in Heathrow airport.

Already insurers are feeling the pressure from the influx of insurance claims as a result of Wednesday’s eruption and the subsequent airspace shutdowns.

American travel insurer, Travel Guard, has reported that its assistance centers have been flooded with more than triple the call volume typically experienced on a Thursday to Monday time frame.

“We’re being swamped with calls from both U.S. travelers trying to get to Europe and those stranded in Europe,” said Travel Guard spokesperson Charles Mardiks.

Travel insurance covers the great unforeseen “what ifs” of travel. However, only about 30 percent of Americans purchase it, and most coverage is created for the mundane annoyances of travel: trips cancellations or interruptions, missed connections, bad weather and lost bags.

Insurers don’t usually foresee smoldering Icelandic volcanoes in their policymaking. So though most insurers have been generous in their response to the crisis, policyholders face a lot of uncertainty, especially as the shutdown enters its fifth day.

“The bottom line,” advises President John W. Cook of Connecticut-based travel insurance seller QuoteWright, “is you need to read your plan carefully, and don’t assume that there will or will not be coverage.”

Here are some answers the most critical insurance questions about the Icelandic volcano eruption and its effect on travelers.

Help, I’m stranded in Europe! Will my travel insurance cover me?

The answer to this question depends on whether or not your insurance provider classifies the volcano as a “natural disaster” or an “adverse weather” event.

Most insurance policies cover adverse weather events that cause your airline to cease operations for a specific time period, usually 24 hours. Bad weather is a common occurrence and makes economic sense to include in a travel insurance policy.

Natural disasters, on the other hand, are not as common, so some insurance providers choose not to include them in their insurance packages in order to keep premiums competitive.

There’s a good chance that though your insurance provider will cover adverse weather problems, they will not cover natural disasters.

That means the way insurers are classifying the volcanic ash cloud is having a big effect on coverage for trip cancellation and interruption coverage.

If your policy does not cover natural disasters, it’s possible that you may be denied coverage. Even when the policy does cover natural disasters, you might not be covered if your location is still habitable.

Some travel insurances provide coverage only if your destination is “made uninhabitable by a natural disaster,” which might work if you were traveling to earthquake-damaged China, but not if you are stuck in London.

Luckily, most insurers have decided that the wind carrying the ash should be considered as adverse weather, so unless your insurance has a heart of Grinch-like proportions, you should be covered by your insurance.

However, many companies have determined that policies purchased on or after April 13, 2010—when the effects of the volcanic ash became a “foreseen event”—are not are eligible for trip cancellation, trip interruption or travel delay benefits. Some others, such as CSA Travel Protection and Access America, have a later cut-off date of April 15, 2010.

I have travel insurance. What does it cover?

Those lucky enough have travel insurance are going to benefit the most right now from three types of standard coverage: trip cancellation, trip interruption and trip delay coverage.

Under these three types of coverage, volcano-stranded travelers can see their flight, hotel and food expenses reimbursed. And since most travel insurers are labeling the ash cloud as adverse weather, policyholders should see a full or partial payout for most of their losses.

Many insurers are paying100 percent of non-refundable flight or vacation deposits under trip cancellation and trip interruption policies.

As for trip delay coverage, this type of insurance is going to reimburse the day-to-day expenses incurred by the shutdown. Things like food, hotel and local transportation are covered.

It’s important to know, however, that trip delay payouts are effected by the total cost of your trip, the cost of your policy, and your purchase date. So your options are limited by the amount of money you put into your policy.

An average policy will usually pay out around $150 per person, per day for delays. Depending on the policy, you might also be limited by a maximum payout that ranges from about $750 to $1,500. Depending on the policy, coverage kicks in if you are delayed from three to 12 hours for a reason specified by your insurance.

But the reimbursements are not the only thing that stranded travelers are receiving. Insurers like Travel Guard have their representatives find hotels, alternative flights and prescription replacements for their customers, says Travel Guard spokeswoman, Carol Mueller.

What can I do if my travel insurance policy expires while I’m abroad?

If for reasons covered in your policy and beyond your control, you are stranded and in that time your policy expires, you can get an extension of benefits.

Travelers stranded by the airspace shutdowns meet this criteria. However, the length of this extension depends on your insurance.

Several insurance companies have an ‘open-ended’ extension where the insurance policy’s coverage is extended beyond its expiration date and continued until the traveler has reached their return destination,” says Vikki Corliss, director of public relations at Insuremytrip.

Some companies, however, provide coverage up to but not exceeding seven days beyond the traveler’s original return date. With the crisis extending to its fifth day, time might be running out for some people.

But just because coverage ceases, doesn’t mean benefits stop. “Trip cancellation and trip interruption coverage will usually continue after the end of the extension,” says Cook of QuoteWright.

What might not be covered are medical emergencies. In many cases, if a traveler experiences a medical emergency after the end of the policy extension, they will no longer be covered.

However, Cook suspects that very few people fall under that category. He also believes that policy providers would stand up and continue coverage after the seven-day extension.

Other insurance companies says that they plan to look at extensions on a case-by-case basis.

What if the airspace shutdown continues? Will my insurance pay for an alternate way back to the States?

Hopefully, we won’t see the return of transatlantic sea travel as the primary mode of transportation, but if we do, travel insurance will cover any type of return transportation.

What confines a traveler’s options are the monetary limits set by the cost of his or her trip. So a person who insures an expensive trip has many more travel options than a person who insures an $2,000 trip and essentially gets $3,000 in insurance back.

Travel Guard, however, says that most travelers are not at the point to consider alternate transportation yet. Most travels are looking for alternative flights out of Europe.

Regardless of the uncertainties facing travelers, having insurance is proving to be a life-saver for many stranded in Europe

For more information, visit PeterGreenberg.

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PeterGreenberg is a constantly updated source for the latest in travel news, analysis and information led by travel guru Peter Greenberg. For more information, visit www.petergreenberg.com.

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