Travel insurance premium refunds

“Am I likely to get a refund of a travel insurance premium if I cannot take the trip?”

The short answer is “Probably not.”

This topic came to my attention through e-mail correspondence between John and Elaine Putman of Menifee, California, and me, as follows:

24 January 2010, John Putman to Wayne: “I signed up for and paid for a trip to South America, Oct. 15-Nov. 13, 2010, with Overseas Adventure Travel (OAT) a year in advance in order to get the early-booking discount. I foolishly took out (full-feature) travel insurance at the same time; I purchased it from Travel Guard. Now my health has deteriorated and I’m faced with having to cancel (the cruise), which I can do for any reason without penalty from OAT if I do so by mid July.

“It seems to me that since I have not entered a period where the insurance coverage would take effect, I should be able to get my (insurance premium) money back, less a possible administration fee, of course. What say you? I talked to Travel Guard a while back and they were vague, saying that I would have to submit a request and they would consider it. I would appreciate hearing your opinion.”

28 June, Wayne to John Putman: “I put the question to my travel insurance guru. Sounds to me like Travel Guard might refund if you go through the motions that they ask for. Go ahead and make the request — and let me know the outcome.”

22 October, Elaine Putman to Wayne: “This is in response to your June 28, 2010, correspondence with my husband, John, re Travel Guard possibly refunding an insurance premium paid way in advance of a trip. We canceled a trip with OAT in July, due to John’s deteriorating health, and received all our monies from OAT except for $700, which was kept for administrative fees.

“Unfortunately, my husband died on August 20.

“I was able to send the necessary papers to Travel Guard (i.e., death certificate, copies of monies paid out and monies received) and they refunded $600 of the $800-plus travel insurance premium that we paid to them. I think Travel Guard acted very promptly in this matter. Actually, OAT, too, was very responsive.”

Re premium refunds

I then contacted travel insurance broker Dan Drennen (Omaha, NE; 866/979-6753, ext. 3621, or 402/343-3621 or e-mail dan@travel

insurancecenter.com) and asked for clarification of travel insurance companies’ positions regarding premium refunds. Here is a summary of that exchange:

Dan Drennen: (introductory remarks) “Most plans have at least a 10-day ‘free look’ period, however Travel Guard has a 15-day ‘free look’ period in which you may review your policy and decide if it is what you wanted. If you are not satisfied, for any reason, you may return your certificate within the ‘free look’ period. After that, the premium is not refundable. Refund policies are listed in each certificate of insurance. Please note that ‘processing fees’ are not refundable.”

Wayne: “Give me a hypothetical example of a situation where a purchaser might think that the premium is refundable but is not.”

Drennen: “Let’s say that a couple, today, makes their first deposit ($500) for a cruise in November next year. They buy travel insurance the same day so they will qualify for the ‘preexisting-condition waiver.’

“They insure for the full prepaid nonrefundable cost of the trip ($3,500) because that is also required to meet the ‘waiver’ qualification. They need that waiver, as they have elderly parents who have had a period of poor health.

“The cruise line’s policy is that you can cancel and receive a refund of all monies paid (including the deposit) six months or more prior to the cruise departure date.

“Everything is running along smoothly for three or four months until an unexpected problem arises with hubby’s work, so they cancel their trip and get their deposit of $500 back from the cruise line.

“The premium for the insurance, however, is not refundable. This is because the insurance company has been providing a benefit: they have insured the couple against trip cancellation since the day after their policy purchase. However, the couple could reschedule the cruise and move the insurance coverage to the new date.”

Wayne: “Give me a hypothetical example where a premium would be fully or partially refunded. I mentioned to you over the phone recently where a couple had booked a cruise and bought a full policy a year before embarkation. His health deteriorated well within the period in which the cruise could be canceled with little or no penalty. He died shortly after, and the cruise booking was canceled.

“The cruise line refunded the couple’s money, less a modest ‘administrative fee.’ Travel Guard refunded $600 of their $800 premium. Would other travel insurance companies do the same?”

Drennen: “I don’t know if I can give you a hypothetical on this one. Technically, Travel Guard did not have to refund the premium for this couple, but they did. Not knowing the circumstances, it would be hard to know why the decision was made to refund. I can only say that Travel Guard is a top-notch company and we are proud to represent them.

“With regard to partial refunds of premiums, every case is unique, with extenuating circumstances. We have had several situations where we requested and received refunds of premiums for customers from Travel Guard. However, those were ‘$0.00 trip cost’ policies, in which case benefits do not apply until after departure.

“We haven’t been quite that lucky with refund requests with some of the other companies that we broker. Some are pretty hard-nosed about it.”

Wayne: “Was he foolish to purchase the coverage a year before the embarkation date? He would have had to do that to have the preexisting-condition clause waived.”

Drennen: “He was not foolish to purchase the insurance. I’m sure he must have had some peace of mind knowing that he was insured. Yes, buy the insurance right away to qualify for the waiver. The purchase window for waiver qualification is generally 14, 15, 21 or 30 days from the date the first deposit is made. CSA Travel Protection offers the waiver if you purchase the insurance before the final payment date.”*

*For the record, for most cruises and tours, the final payment date, when the balance of the trip cost must be paid in full, is typically 45 to 75 days before the start of the trip.

Conclusion

Outside of the “free look” period after you have purchased and received your travel insurance policy, you are not likely to get a refund of the travel insurance premium.