Author: Melissa A.
Published: November 1st, 2023 | Updated: November 1st, 2023
Read time: 4 mins
Many travellers book vacations months in advance, and they can be costly. With travel suppliers such as airlines, cruise lines, transportation and tour operators and hotels regularly ceasing operations due to financial circumstances, it’s essential that your travel insurance plan includes travel supplier financial default coverage so your prepaid, non-refundable trip expenses can be reimbursed if this unfortunate event were to happen.
How does travel insurance for financial default work?
Financial default coverage is found in some trip cancellation and interruption benefits plans. To be eligible for supplier financial default coverage, your travel insurance policy must be purchased through a third-party travel insurance company and include that coverage. For example, you cannot buy your policy from a second party, such as an air, land or sea carrier, tour operator or a travel agency with whom you made your trip booking.
Additional financial default coverage eligibility requirements typically include purchasing a policy within 14 days of making your initial trip payment. There will be a waiting period before financial default coverage is effective, and timeframes can vary by policy. Your trip’s prepaid, non-refundable trip cost must be insured in its entirety, your policy must cover your entire trip duration, and a travel supplier’s cessation of operations must occur more than seven days after your policy’s coverage effective date to be eligible for reimbursement of your trip costs if your trip gets cancelled or interrupted.
What if my travel supplier experiences financial default before or during my trip?
Suppose your travel supplier experiences financial default before your trip, and your trip is cancelled. In that case, you can have the eligibility to be reimbursed for your prepaid, non-refundable trip payment under the trip cancellation benefit if it covers supplier financial default.
On the other hand, if your travel supplier experiences financial default during your trip and your trip is interrupted, travel insurance for financial default can reimburse you for the unused, non-refundable portion of your trip and transportation costs you incur to return home or continue your trip. Trip insurance for financial default can also reimburse you for transportation and accommodations costs if you must stay longer at your destination due to a trip interruption. Review your travel insurance policy closely to determine whether supplier financial default is a covered incident under the trip interruption benefit.
Is supplier financial default the same as bankruptcy?
Bankruptcy is when a travel supplier seeks legal protection to overcome financial difficulties. It’s important to understand that you cannot be covered for financial default if a travel supplier is bankrupt.
Supplier financial default differs from bankruptcy. It’s when a travel supplier stops operations and no longer provides company services, and there’s no possibility of financial recovery. A travel supplier can halt business operations whether it files for bankruptcy or not.
How can I get coverage for travel supplier financial default?
Travel insurance for supplier default is wise coverage if you have trip costs you can’t afford to lose and go into debt for. Typically, this coverage is found in a trip cancellation and interruption benefits plan, although it’s not always part of every plan, and not every provider offers it. You will often need to purchase a travel insurance policy within 14 days of making your initial trip payment, and there will be a waiting time period before financial default coverage is effective. Timeframes can vary by plan. Trip cancellation and interruption travel insurance plans are available through us at InsureMyTrip. You must ensure that a policy includes supplier financial default coverage before purchasing if you want to be covered.
Note: If you need to file a claim for supplier financial default, you may have to do so through the provincial travel industry regulator first and then claim any remaining loss from the insurer. This is because provincial travel industry regulators who license travel suppliers may have a compensation fund that protects you in the case of supplier financial default.
DISCLAIMER: This guidance in this article is provided for informational and educational purposes only. It is intended to offer guidance regarding travel insurance and the benefits which may be available. It does not guarantee coverage for any traveller. The information in this article reflects the most up-to-date information available at the time of publication. If you have questions regarding specific coverage details or available travel insurance plans, please contact our licensed customer care team.