There are plenty of reasons why you might be fantasizing about an exotic getaway in late 2020 and the early months of 2021. Lockdowns, Zoom fatigue, and a bleak news cycle have exacerbated your cabin fever. Also, while the resurgence of COVID-19 has led to Americans being barred from most countries, the countries that are open to us are of the “Margaritaville” variety.
Jamaica, The Bahamas, The Maldives, and more are all open to American tourists. Flights are cheap, with many discounts just a click away.
So now would seem the ideal time to head to Expedia to save big, right?
Well, you should know that traveling internationally during a pandemic comes with its own elevated risk. Not only could you catch COVID-19, but you could pay for it overseas, too because most travel insurance companies will not cover the pandemic.
Most travel insurance doesn’t cover pandemics
To give the industry some credit before diving into the problem, I do think that getting travel insurance is a good idea under normal circumstances.
Why travel insurance is normally a good idea
Booking international travel is an investment. You invest thousands of dollars upfront, and a few months later when you fly out, your return on investment comes in the form of food, culture, learning, pleasure, social connectedness, etc. In essence, you invest a few thousand bucks to relax, have fun, and become a better human being. The ROI is justifiably high.
However, while international travel can offer high returns, it’s also high-risk. Many outside factors can reduce your returns to 0 in an instant.
Let’s say you invest $2,500 for a weeklong trip to Switzerland. You’re hoping for high returns on skiing, chocolate, bonding with your boyfriend, etc. However, two days before your departure date, your pet gets gravely sick. Or your boyfriend’s grandmother passes away. Or your tour company declares bankruptcy. In all three cases, you’ll skip the trip and never see that $2,500 again. However, if you’d ponied up ~$150 for travel insurance, you’d be covered for the full amount.
Generally, travel insurance costs ~5%-10% of the trip’s full cost and covers three categories: you, your property, and your plans.
- You. Medical bills, medical screenings, accidental death, and dismemberment (yikes).
- Your property. Your luggage, some valuables, and your rental car.
- Your plans. Cancellation and/or interruption of your flight, tour, or overall trip caused by you, your tour company, or an Act of God.
If travel insurance sounds pretty comprehensive, that’s because it is. Even if you never submit a claim, travel insurance adds peace of mind to your relaxation time like a generous drizzle of butter on a filet mignon.
Better yet, many credit cards offer built-in travel insurance coverage. For example, if you book with your Chase Sapphire Preferred® Card, you’ll automatically receive baggage loss/delay coverage, roadside assistance, trip delay/cancellation coverage, and more.
However, to circle back to my preamble, this is all during normal times. And I think everyone would agree that “normal times” left us in late February.
Why travel insurance companies don’t cover pandemic-related expenses
Traditionally speaking, travel insurance companies do not cover pandemic or pandemic-related expenses. Per the New York State Department’s website,
“most standard travel insurance policies are not likely to provide trip cancellation/trip interruption coverage related to COVID-19.”
Well, that’s vexing. Why wouldn’t an insurance company cover the #1 reason why I might need to file a claim? Isn’t that like a car insurance company not covering a collision?
Thing is, most travel insurance companies don’t cover pandemics for a few understandable reasons:
- Pandemics are unpredictable. Pandemics are moving targets, and the average insurance company isn’t equipped to factor constantly changing risk factors into their sensitive algorithms.
- Pandemic-related expenses are astronomical. The average cost of a COVID-related hospitalization in America is $30,000 (CNBC). Costs could be similar in a foreign country with lesser equipment and a longer hospital stay.
- Pandemics wreak havoc on the entire industry. Back in March, more than 20 airlines suspended operations by 100% and although they were quick to adapt, most travel insurance companies are still overwhelmed by a backlog of “cancel for any reason” claims.
Although eager for new business, travel insurance companies are admirably forthcoming about NOT covering COVID-19.
Visit the website for Allianz Global Protection and you’ll be greeted by a red banner reading:
IMPORTANT: Our travel protection plans generally do not cover losses related to COVID-19, including due to government-imposed travel bans or other travel restrictions related to COVID-19. We highly recommend that you DO NOT purchase a travel protection plan for such conditions. Please read our Coverage Alert for more details before purchasing.
Similarly, Travel Guard doesn’t want to mislead you into thinking you’ll be covered for COVID-19:
Due to the World Health Organization (WHO) announcement declaring Coronavirus (COVID-19) a pandemic, please note that as of, at the latest, March 11, 2020, COVID-19 is a foreseen event and certain coverages will not apply.
If you’re still itching to escape to somewhere tropical, you may have latched onto the word “certain” in Travel Guard’s disclaimer. Indeed, if you still want to travel internationally during COVID-19, it’s important to distinguish what is and isn’t covered so you can decide if it’s worth the risk to your health and finances.
So where do travel insurance companies draw the line?
Travel insurance – what is (and isn’t) covered during a pandemic
It’s my personal belief that international travel during the pandemic is too risky.
If you’re visiting loved ones, you might infect someone upon arrival. If you’re traveling for business, consider whether the risk of being on the hook for a $30,000+ hospital bill is worth the potential upside. And if you’re traveling just for fun, consider that driving to your nearest derelict beach or lake is 10 times cheaper and safer, and you can apply savings towards a better trip next year.
My personal views aside, if you’re still determined to travel overseas during the pandemic, you should know what is and isn’t covered by a travel insurance policy.
What travel insurance still covers during COVID-19
While you should always carefully read your terms and conditions, here’s a general overview of what the average travel insurance policy purchased during COVID-19 will still cover:
- Loss of property. Travel insurance may still cover lost or stolen goods, missing or delayed baggage, and rental car damage.
- Employment termination/layoffs. If you’re suddenly let go prior to your nonrefundable trip and need to cancel to save money/search for a new job, travel insurance may cover you.
- Missed connections. Travel insurance may cover the cost of getting back on track due to a lost connection. This is a good idea for cruises since it recoups the cost of “catching up with the boat.”
- Trip cancellation/complications due to non-COVID reasons. If your travel company goes under or your destination suffers a terrorist attack, you may be covered.
- Medical expenses. If you’re hospitalized for on your trip for a non-COVID-related reason, your travel insurance should cover your related expenses (up to a certain amount of course)
- COVID-related medical expenses WITH DIAGNOSIS. In rare cases, your travel insurance company might cover the cost of your trip if you’re diagnosed with COVID-19 prior to departure. If you’re diagnosed while on your trip, your policy may cover some medical expenses. Per Travel Guard’s official statement:
If you contract COVID-19 prior to departure, you would be covered for Trip Cancellation, if you have a confirmed and documented diagnosis and/or you are medically unable to travel at the time of departure due to COVID-19. If you contract COVID-19 while on a covered trip, you would be covered for Medical Expense and Trip Interruption/Curtailment benefits if you have a confirmed and documented diagnosis.
That might sound more comprehensive than you were expecting for pandemic travel insurance, but there’s still a rather large gap in most policies.
What travel insurance doesn’t cover during COVID-19
Travel insurance has value during COVID-19, but it still leaves some large and potentially pricey gaps in coverage.
- “Fear”. Yes, “fear” is singled out by travel insurance companies as a “circumstance” they won’t cover. If you read the news and get cold feet about going, your travel insurance company will likely shrug their shoulders and say “see? We tried to tell you…”
- COVID-19 related expenses. Even if you yourself aren’t diagnosed, there are countless ways COVID-19 could derail your travel plans. A passenger on your cruise ship may be diagnosed, forcing everyone into lockdown. Your airline might go into bankruptcy, stranding you. A foreign government may force you into quarantine, causing you to miss the rest of your trip. None of these reasons would be covered under most plans. Even if you are diagnosed, travel insurance will only cover you for your medical expenses and only up to your coverage amount. For example, they may cover $10,000 of a $30,000 medical bill, so you’re still out $20,000 plus the cost of getting home.
- “Reasonably foreseeable events and problems”. Travel insurance companies generally don’t cover what they call “reasonably foreseeable events”. To use an example from Allianz’s site, if you purchase insurance for a trip to the Bahamas when a named hurricane is on the way, you won’t be covered for any damage or cancellations as a result of that hurricane.
In essence, travel insurance companies won’t cover expenses that they deem could’ve been easily avoided by simply not going. They don’t cover you for problems that are likely to occur.
As you might expect, in the early days of the pandemic travel insurance companies were quick to classify COVID-19 as a “foreseeable event” to cover themselves and dissuade non-essential travelers from taking out policies.
Therein lies the issue; because the pandemic is wreaking absolute havoc on all aspects of the travel industry, virtually every problem you might want to submit a claim for could be traced back to COVID-19. You’re much more likely to experience a COVID-related problem than a non-COVID-related problem on your trip, and travel insurance only covers some of the problems in the latter category.
To draw an analogy, imagine you’re looking to buy a home in Washington State. However, Godzilla is rampaging through Washington State destroying thousands of houses every day. Plus, he has no signs of leaving. You speak to a home insurance agent who tells you that they’ll still cover for fire and theft, but you’re outta luck if Godzilla levels your house.
Would you still move to Washington, or maybe wait a year or two for Godzilla to leave?
There’s no question that COVID-19 has upended our daily lives, and it’s only natural to feel the urge to escape to somewhere exotic. But even though the cost of international travel is enticingly low right now, the risk to your health and finances is astronomically high. It’s rather telling that travel insurance companies are openly admitting that they cannot, and will not, protect your investment.
For the time being, you’re much better off driving to watch the fall colors in their full glory, staying in an Airbnb for a few days, and saving your big vacation money for a less risky time.
Or better yet, invest it!