The major differences between travel insurance and trip cancellation insurance

Anyone who’s ever booked a vacation online has been faced with the decision to purchase travel insurance.

However, after the onset of the COVID-19 pandemic, another insurance option began surfacing—trip cancellation insurance.

Often overlooked, or looped into the same category, travel insurance and trip cancellation insurance may sound similar, but each option comes with its own set of parameters. 

Allianz Global Assistance (Allianz) recently completed its annual Vacation Confidence Study, which found that 89 per cent of Canadians plan to obtain travel insurance for their next trip and that a strong majority – 84 per cent – of Canadians see travel insurance as important when travelling internationally.

In order to help travellers choose the best option to suit their holiday travel plans, Dan Keon, vice-president of marketing and insights at Allianz Global Assistance, weighs in on both options.

What is travel insurance?

Travel insurance is designed to mitigate the risks and uncertainties associated with travel. It provides coverage for a range of potential scenarios that travellers might run into, including trip cancellations, medical emergencies, lost or delayed baggage and other unexpected or unfortunate events. 

One of the biggest misconceptions about purchasing travel insurance is its overall cost, with many Canadians hesitant to spend extra on their vacation. But according to Keon, there are many factors that reflect its price.

“The cost of travel insurance coverage tends to vary based on a traveller’s age, length of trip and benefits purchased,” Keon says. “However, travel insurance premiums are a fraction of the potential cost of healthcare abroad when a medical emergency occurs, which is why the Government of Canada recommends all Canadians have some form of travel medical coverage in place when they leave the country.”

Typically purchased before your trip, travel insurance serves as a safeguard, offering financial protection and peace of mind to individuals exploring new destinations. Policies can vary widely, with coverage options tailored to the specific needs of travellers, and may include elements such as trip interruption, emergency medical expenses, evacuation assistance, and even coverage for travel-related cancellations.

Overall, travel insurance acts as a safety net, helping travellers navigate unforeseen challenges and ensuring they can focus on enjoying their trip without undue worry about potential setbacks.

What is trip cancellation insurance?

Unlike travel insurance, which includes protection against medical expenses and lost baggage, trip cancellation insurance provides coverage for financial losses incurred by a traveller when they are forced to cancel or interrupt their planned trip due to unforeseen circumstances. 

This type of insurance is designed to reimburse the policyholder for non-refundable expenses related to the trip, such as prepaid airline tickets, hotel reservations, tour packages and other associated costs.

“Trip cancellation is a benefit within a travel insurance plan,” Keon explains. “If something unexpected occurs and the traveller needs to cancel the trip due to a covered reason, having travel insurance can help them recoup some or all of those prepaid costs.”

Covered reasons for trip cancellation often include sudden illness or injury, death of a family member, natural disasters, and other unexpected events outlined in the insurance policy. 

Which one should you buy?

Deciding between purchasing trip cancellation insurance or a more comprehensive travel insurance policy depends on your specific needs and concerns. 

If you’re mainly concerned about recouping expenses in case your trip gets cancelled, and other potential issues aren’t as worrying, trip cancellation insurance might be sufficient.

However, if you want more extensive coverage and protection against a wider range of scenarios, including medical emergencies or travel delays, then a full-fledged travel insurance policy may be a better choice.

As always, before making a decision, carefully review the terms, conditions, and coverage options of both types of insurance to ensure that the policy you choose aligns with your specific needs and travel plans.

It’s also always a good idea to consider factors such as your health, the nature of your trip, and the overall risk level you’re comfortable with.