How Trip Cancellation Insurance Works

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I always tell people that having travel insurance is a must whenever you travel. Not only should you have travel medical, but you should also have travel insurance that covers things such as trip cancellation, flight delay, baggage delay, car rental theft, etc. Having travel insurance covers you in the event that you need medical attention while you’re abroad and/or if you need to cancel for unforeseen reasons.

Reading your certificate of insurance is vital since it’ll explain what you’re covered for, but most people don’t do that. Who wants to read a 40-page document right? Well, whenever there’s a crisis in the travel industry, people want to know how their trip cancellation works.

In this article, I’m going to go over what trip cancellation insurance is and when you can make a claim.

Trip Cancellation Insurance

What is trip cancellation insurance?

As the name implies, trip cancellation insurance allows you to get some (or all) of your trip expenses back in the event you need to cancel your trip. Generally speaking, if you’re getting trip cancellation insurance, you may also get additional travel insurance included such as trip interruption and delay, lost/delayed baggage, car rental theft damage insurance, travel accident, and hotel/motel burglary.

Every travel policy is different so clarify with your insurance broker before you make the purchase or refer to your certificate of insurance if you’re relying on your credit card travel insurance.

How to get trip cancellation insurance

Purchasing travel insurance is easy since most banks and insurance companies have plans available. Even airlines, travel agents and tour operators offer travel insurance (which comes from a travel insurance provider). Generally speaking, travel insurance comes in two options. There’s travel medical which covers anything medical related and a premium or comprehensive plan that would include trip cancellation and the other types of insurance mentioned above. You can buy each option separately or together as a package. You can also purchase it as a single or multi-trip plan. The multi-trip plan is usually the best value as it’s normally cheaper than two individual plans.

Note that some travel insurance providers including Manulife and TuGo are no longer covering new customers who need to cancel due to COVID-19 (Coronavirus) as they now consider it a known issue. I wouldn’t be surprised if other insurers do the same. Speak to your insurance provider to find out exactly what’s covered.

The best credit cards with travel insurance all include trip cancellation insurance, but you still need to read the fine print. For example, the American Express Platinum Card certificate of insurance says you must pay the entire cost with your card for your insurance to be valid. That means if you wanted to claim your trip cancellation insurance for flights, you would have needed to charge the entire cost of your flights to your American Express Platinum Card.

Not all credit cards require you to charge the full amount of your travel expenses for your travel cancellation insurance to be valid. The BMO World Elite Mastercard says you can charge any amount. In theory, you could charge just $1 of your applicable travel expenses to your card and you’d be covered.

When can you claim trip cancellation insurance?

Here’s where things get complicated. Unless you have purchased a cancel for any reason (CFAR) option with your travel insurance, you can only cancel under specific circumstances such as the following:

  • You or your travelling companions have an unexpected sickness or injury
  • You or your travelling companion’s death, or the death of your host, immediate family member or friend at your destination
  • Travel advisory
  • A natural disaster or unforeseeable event that makes your home or business unlivable
  • You or your travel companion are denied a visa for your destination
  • Job loss or relocation
  • A cancelled flight or missed connection due to weather, natural disasters or automobile mechanical failure
  • A cancelled business meeting at your destination that’s out of your control
  • Complications occurring due to pregnancy within the first 31 weeks

Again, every insurance policy is different so you need the fine print but I wanted to give you an idea of what you’re covered for.

The most common reason people use their trip cancellation insurance is due to a sickness or injury. You’d obviously need a doctor’s note advising against travel to make a claim.

With the travel advisory clause, it usually has to be a level-3 advisory from the Government of Canada advising Canadians to avoid all non-essential travel to a country, region or city for your trip cancellation to apply.

However, it’s not that simple. At the time of this writing, there’s a level-3 advisory for parts of Nothern Italy. Since Rome doesn’t fall under that advisory, you wouldn’t be able to claim your travel cancellation insurance. Venice and Milan fall into Northern Italy, but since there’s no official advisory for those cities, it’s possible that your trip cancellation insurance provider will deny your claim. **The level-3 advisory now applies to all of Italy so your trip cancellation would apply if you have a trip booked to the country.

To make things more complicated, payouts can be very confusing depending on the airline you’re flying with. For example, Air Canada issues you a credit when you need to make a cancellation. However, when you use that credit later, you pay a change fee. That fee is each way and per person. The fee also differs depending on what type of fare you paid.

Your insurance provider could deny your claim since you’re getting credit. Here’s the thing, you can actually get those change fees reimbursed too. Once you use your credit and the change fees have been applied, you can send that proof of fees to your travel insurance provider to be reimbursed. Alternatively, you could let your credit expire after a year and then make a trip cancellation claim then. Either way, you want to make a claim right after you cancel your flight so there’s a record of your claim.

Now you’re probably thinking you should just purchase cancel for any reason insurance. You could do that, but it’s expensive and typically only covers up to 75% of your trip costs.

What to do if you can’t make a trip cancellation insurance claim

If you can’t claim your trip cancellation insurance, then you need to read the refund policies for each individual booking. 

Some airlines will give you a credit for your flight but you may still need to pay a fee. Alternatively, you might be able to change your route at no cost or for a small fee. It really depends on the situation. E.g. if a health crisis or natural disaster affected an area you’re heading to, some airlines allowed changes at no charge.

Hotels are much more strict about their refund policies. Some major chains including Marriott allow you to cancel for free up to 24 hours before your scheduled check-in, but that assumes you didn’t book a pay now and save rate. Smaller hotel chains or independent hotels likely won’t give you a refund at all. That said, it doesn’t hurt to call the hotel directly to see if you can get a credit or partial refund.

Final thoughts

Having travel insurance, including trip cancellation is a must whenever you travel. However, you need to understand that you can’t just cancel because you’re afraid or you don’t want to go anymore. Read over your policy so you’ll know exactly when you can make a claim.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi


  1. Tiffany Dang on March 7, 2020 at 2:59 PM

    Thanks for the insight, Barry! I booked my bach for Vegas in May and now am worried about travel bans due to the recent case there! Gonna double check my card fine print to see if the card I booked on has trip coverage/cancelation now…

  2. Enrico m I on March 7, 2020 at 8:02 PM

    “Note that some travel insurance providers including Manulife and TuGo are no longer covering new customers who need to cancel due to COVID-19 (Coronavirus) as they now consider it a known issue.” Oh really? And what could be more important and pertinent as I write than cancelling because of COVID-19? Who wants to travel to high risk areas? And if that isn’t just cause, I really cannot fathom anything any more imminently dangerous. That’s why insurance companies have the reputation of rapacious businesses.

  3. John Cherrington on April 15, 2020 at 12:36 PM

    Manulife also won’t honour my trip cancellation claim even when I booked the travel tour almost a year ago because the tour company is offering full credit for a future tour.

    • Barry Choi on April 15, 2020 at 1:20 PM


      Yes, that seems to be standard policy for many insurers since a credit and insurance claim would be double dipping. Did you check to see if they’ll refund you once the credit expires? American Express does this.

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