Trips can be a big investment, often costing several thousand dollars or more.
That’s why many travellers purchase trip cancellation and trip interruption insurance, which reimburses you for eligible travel expenses like airfare, hotels, cruises and tour packages if you need to cancel your trip or return home early.
However, when it comes to winter vacation rentals, most snowbirds are still leaving themselves unprotected.
Many snowbirds aren’t aware that trip cancellation and trip interruption insurance can be used to protect vacation rental expenses, and some are under the false impression that vacation rentals aren’t eligible for coverage.
Considering the fact that vacation rentals are usually the biggest travel expense for snowbirds who don’t own a vacation property - with rental costs often ranging from $10,000 - $30,000 or more per winter – it is surprising that so few snowbirds are using trip cancellation and trip interruption insurance to protect their investment.
In addition, because snowbirds frequently book their vacation rentals for the following season several months in advance, a lot can happen between the date you book your rental and your departure date.
Even if trip cancellation and interruption insurance isn’t right for your vacation rental, it’s important to know that the option exists, understand how it works and when it will - and won’t - cover you so you can make an informed decision.
What’s the difference between Trip Cancellation and Trip Interruption Insurance?
While the terms trip cancellation insurance and trip interruption insurance are often used interchangeably, it’s essential to be aware that they are different and cover different situations.
Having said that, the two types of insurance are usually purchased together as part of a single policy (although they are sometimes offered separately).
If you purchase an all-inclusive travel insurance policy that includes emergency travel medical, baggage loss and trip cancellation/interruption coverage under a single policy, be advised that the trip cancellation/interruption component will have a fixed coverage limit, so you may want to consider getting additional coverage if the value of your trip exceeds the limit.
What is Trip Cancellation Insurance?
Trip Cancellation Insurance reimburses you for eligible, non-refundable travel expenses if you need to cancel your trip prior to your scheduled departure date due to one of the eligible causes for cancellation listed in your policy.
What is Trip Interruption insurance?
Trip Interruption Insurance, on the other hand, reimburses you for the unused portion of any eligible, non-refundable travel expenses if you need to come home early after you have departed for your trip due to one of the eligible causes for interruption listed in your policy.
It also covers the cost of one-way economy airfare back home, which may be subject to a maximum coverage limit.
Trip interruption insurance may also include maximum coverage limits for specific travel expenses, so check your policy to understand what these limits may be.
The following example illustrates how the unused portion of your eligible, non-refundable travel expenses for a vacation rental would be calculated:
Let’s say you rent a condo in Florida for 4 months at $4,000 per month, for a total of $16,000, and one month into your trip, you are required to return home for the rest of the winter due to a covered cause for interruption. Since you have already used one month (or 25%) of your condo stay, your trip interruption would reimburse you for the unused three months (or 75%), which in this case would be $12,000.
Note – The reimbursement amount would be subject to individual policy limits, so you should check your policy at the time of purchase to for any limits on vacation rentals/accommodations.
When should you purchase Trip Cancellation/Interruption insurance?
Trip Cancellation/Interruption Insurance is often purchased at the time you book your travel arrangements, for example, your airline tickets, hotel accommodations, cruises and tours, if you are booking through a travel agent.
However, depending on the length of time since your trip booking, you may also be able to purchase insurance after you have booked your travel, which can be beneficial if you:
- Want to shop around to compare coverage options and pricing; or
- Are not booking through a travel agent, which is usually the case when it comes to vacation property rentals, as most rental arrangements are made directly with owners, real estate agents or property managers who don’t offer insurance.
How are premiums for Trip Cancellation/Interruption insurance determined?
Premiums for trip cancellation and interruption insurance are based on the value of your eligible non-refundable travel expenses that you want to insure. It’s important to know the value of these expenses in Canadian dollars when purchasing your insurance policy, as you will need them to get a quote.
Your age, the insurance provider and your policy’s terms of coverage can all play a role in how much your premium is.
As a rule of thumb, trip cancellation/interruption insurance premiums for mature travellers are typically in the range of 5% - 10% of the value of the travel expenses you are insuring.
What reasons am I allowed to cancel or interrupt my trip for?
It is essential to understand that you can’t cancel or interrupt your trip for any reason and receive reimbursement under your trip cancellation/interruption policy.
Your policy will include a specific list of reasons for cancelling or interrupting your trip that will entitle you to file a claim. These are commonly referred to as “covered causes”. If you cancel or interrupt your trip for a reason other than a covered cause, you will not be entitled to compensation.
Covered causes can be broken down into medical causes and non-medical causes.
Some common medical covered causes include an unexpected or unforeseen illness, injury or death of an insured person, an insured person’s travel companion or an insured person’s immediate family member. Check the definition of an “Immediate Family Member” as they vary from insurance company to insurance company.
Some common non-medical covered causes include flight cancellations due to a weather delay, missed flight cancellations, being summoned for jury duty, a job loss, a disaster at your residence in Canada and a Government of Canada issued advisory against travel to your destination after the date of your booking.
Covered causes can vary among insurance providers and policies, so make sure you read and understand the covered causes when you’re comparing coverage.
Do Trip Cancellation/Trip Interruption Policies include stability clauses?
It’s important to be aware that trip cancellation and interruption policies include a medical stability clause in the event that you need to cancel or interrupt your trip for a medical reason.
Essentially, this means that if you cancel or interrupt your trip due to a pre-existing medical condition, that condition must have been “stable” (i.e. unchanged) for a minimum period of time prior to the date you purchased your policy.
If you purchase your policy on the date you booked your trip, the period starts on this date. If you purchase your policy after you book your trip, the period starts on this date. So, if you did not buy coverage on the booking date, and then get a medical condition and try and purchase coverage, you would be out of luck.
A common stability period for trip cancellation/interruption insurance is 90 days, but can vary from policy to policy, so be sure to check yours.
If you cancel or interrupt your trip for a pre-existing medical condition that was not stable for the full stability period, you would not eligible for reimbursement.
Keep in mind that if you need to cancel or interrupt your trip due to a travel companion or immediate family member’s medical condition, they must also meet your policy’s stability clause requirements for that medical condition. If they don’t, you would not be eligible for reimbursement.
What are the coverage requirements for vacation rentals?
If you’re considering getting trip cancellation and interruption insurance for your vacation rental, here are a few eligibility criteria you need to be aware of:
- You will need to have a written rental agreement for your vacation property. This agreement should include details about refund policies and payment terms.
- Your rental expenses must be non-refundable.
- You should have receipts for any rental amounts you have paid.
- Your cancellation/early return must result from an unexpected or unforeseen event.
- Your reason for cancellation/early return must be a “covered cause” under your insurance policy.
- If you cancelled or interrupt your trip for a medical reason, you must meet your policy’s stability clause requirements.
Disclaimer: The material provided in the Snowbird Advisor Insurance Learning Centre is for informational purposes only and does NOT constitute insurance, legal, financial or other advice, and should not be relied on as such. If you require such advice, you should speak with a qualified professional to assist you.