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Cancellation insurance is an option in a travel-insurance policy or as a standalone form of protection. When you make travel plans, you typically have to book flights, transportation and hotels. You may also buy tickets and pay other fees in advance because of the trip. This type of insurance covers these costs if you have to cancel your plans for any of various reasons.
When you make a booking in advance of a trip, you can often cancel by a certain date. However, the airline, travel agency, hotel or rental company may charge you a nonrefundable cancellation fee. A standard cancellation policy covers the losses you occur for these fees and for nonrefundable prepaid expenses for any reason outlined in your policy.
The specifics of coverage vary. However, a standard policy inclusion provides benefits if you, a family member or a travel partner become sick, injured or die and are unable to travel. You are also normally covered if the tour company, for example, goes out of business or cancels your tour without refunding your money. Although you may also incur fees if you miss a flight and have to reschedule for a reason such as a car accident, your policy may cover these costs as well.
A pre-existing condition clause is a common caveat for if you cancel travel because of personal, family or travel partner illness. Similar to some medical insurances, this clause states that benefits aren't paid if the reason for the cancellation is related to a traveler's pre-existing medical condition. It is important to check with your travel agent or insurance rep to see whether your policy includes this clause.
Premiums for cancellation coverage vary depending on the total cost of the trip and the additional types of protection in your travel policy. You can often get cancellation-only coverage for a small fraction of your trip fees. Before purchasing coverage, you should check with your credit card provider if you use a card to purchase tickets or to book. Some card companies offer modest reimbursement protection for travel cancellations that may negate or mitigate your need for a cancellation plan.
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