Know Who Pays When Your Flight Doesn’t Go Up

This past summer, two of the UK’s biggest airlines stranded hundreds of thousands of travellers in distant locations by cancelling flights at the last minute and invalidating reservations for future flights already planned: Ryanair because of pilot scheduling problems, and Monarch Airlines because it suddenly went out of business—virtually overnight.

What about all of those passengers left stranded overseas? Thanks to some quick action by Britain’s Civil Aviation Authority, and a special consumer protection program in which most vacationers book their trips with specially licensed and bonded travel organizers, most were returned home relatively quickly on aircraft chartered by the CAA at no cost to themselves.

But at first glance it was not quite so clear as angered passengers were told by airline staff to call their travel insurers for assistance home and recompense for the costs of making and paying for alternate arrangements. At which point the Association of British Insurers chimed in and told the defaulting airlines to just “hold on.” What had occurred was a failure of travel suppliers (in this case, the airlines) to provide their services and in the UK as in Canada that is not a covered benefit under trip cancellation insurance.


Who is to blame?

And that is a sound lesson for Canadian travellers who might suddenly find themselves stranded, bumped, inordinately delayed, or even offloaded in an unscheduled port or country with no immediate remedy, as most travel insurers are payers of last resort and do not cover failures of travel suppliers such as airlines or tour operators that become insolvent or go out of business.

As a rule, travel insurers will cover delays, interruptions, or cancellations caused by reasons other than supplier failures—such as weather disturbances, or other situations beyond the control of airlines or cruise ships. But even those coverages are limited—not open-ended. Each insurer will set its own limits on how much it will pay for any disruption or out-of-pocket costs.

Consequently, you must read and know your policy and what you can expect—and who to blame—if your trip is interrupted or you are stranded in, say, Hawaii.


No double dipping

Where airlines or cruise ships are themselves the cause of cancellation or interruption, such as by mechanical failure or insolvency, you may be offered a refund or voucher for future travel. But understand that such a voucher amounts to “payment in kind” and releases the insurer from any obligation to reimburse you. After all, that would be double dipping.

And during the recent spate of hurricanes in the Gulf of Mexico and the Caribbean there were numerous cruise re-routings, with some ports of call being eliminated and new ones added, or some cruises being shortened or even extended. Under these conditions neither the cruise company nor the insurer are obligated to make any reimbursement—although some cruise lines did offer cost-reduction vouchers for further cruises as goodwill gestures.

The bottom line is that, although trip insurance is a sound means of protecting the investment you make in  your holiday trip, it is intended to repay some of the costs you may already have put out—but it has limitations. You need to know these limitations when buying your insurance, and you must understand that it is always a source of coverage of last resort. If you have coverage for certain situations in an underlying policy already taken out, such as homeowners insurance, or a pension or employment plan, or auto insurance, or a private or government health insurance plan—those sources will be tapped first, before travel insurance comes into play.

So when buying trip cancellation coverage, first of all understand what you already have. Then find the coverage you need for your specific situation.


Ready to browse your trip interruption and cancellation options? Learn more here.

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