You've booked an expensive cruise or tour, then have second thoughts about what might happen if there's a last-minute emergency that forces you to cancel.
There are travel-insurance policies designed to cover just about any circumstance that could derail a trip. But when it comes to protecting yourself against a cruise line or tour company on shaky financial ground, things get more complicated.
"Financial default is the big gotcha," says Jim Grace of InsureMyTrip.com, a website that compares and sells travel-insurance policies.
Best advice: Pay with a credit card to protect your investment in a cruise or tour. And, if you buy travel insurance, take a pass on the policies sold by cruise lines and tour operators, and buy one directly from a third-party insurer that will cover the financial default of the cruise or tour company and other prepaid expenses such as flights, hotels and shore excursions.
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Paying for airline tickets, tours or cruises with a credit card is the No. 1 rule.
"When we see cruise lines or others offer cash discounts for non-credit-card purchases, we advise our clients that it's in their best interests to purchase with a credit card," says Steve Pomranz, vice president of travel services for AAA Washington.
Under the federal Fair Credit Billing Act, credit-card charges can be disputed up to 60 days after you receive your first bill. Many card issuers extend that to 120 days.
But more important for those who pay for trips months in advance is that most Visa and MasterCard issuers offer further protection through a delayed-delivery clause that gives cardholders 120 days to file a claim, starting from the time a service was to be delivered (that is, the date the cruise, tour or flight was to depart).
"It can vary with the credit-card company," Pomranz says. "But what we have found is that most are willing to work within a time frame of when the services were to be delivered."
When it comes to covering other expenses for a canceled trip, buying trip cancellation/interruption insurance from a tour operator or cruise line might seem like the easiest thing to do, but if you're concerned about the company's financial stability, go through an independent company.
Cruise lines or tour operators can't sell policies covering their own financial default or bankruptcy.
Policies sold by companies such as Access America, Travelex or Travel Guard offer various levels of coverage. The cheapest cover refunds if you have to cancel due to do a medical emergency or death in the family. More expensive plans cover other reasons you might have to cancel, and often include coverage for supplier default.
Consult a travel agent, or a website such as www.insuremytrip.com which sells and compares policies offered by 22 insurance companies. Then call, ask questions and read the policy. Travel insurance is notorious for its loopholes, and what classifies as "default" can be defined in different ways.
While many types of insurance can be bought up until the day of travel, default coverage usually has to be bought within two weeks of paying an initial trip deposit.
No insurer will cover a company already in trouble.
Knowing which companies insurers exclude from default coverage is one way to get a heads-up on who might be having problems. Access America (www.accessamerica.com) offers default coverage only for approved airlines, tour operators and cruise lines listed on its website.
Shopping for travel insurance
Check your other policies for coverage: Before you buy travel insurance, review the policies you have. If you have life, health, or homeowners insurance, you may not need to buy certain types of travel insurance. Read your policy and speak with your insurance company or agent to find out what personal property and medical coverage you have while traveling. If you use a credit card to pay for your trip, ask what insurance benefits are available through your credit-card company.
Ask for recommendations: If you're working with a travel agent you trust, ask about his or her experiences with any recommended travel-insurance companies. Ask if their customers filed claims, and if the companies paid those claims. If you're planning an adventurous vacation, such as sky diving or scuba, ask if the insurance will cover those activities.
Ask about pre-existing health conditions and age limits: Some policies cover pre-existing health conditions if you buy the coverage within a week or two of booking your trip. Others won't pay for pre-existing conditions or they charge higher premiums to cover them. Some insurers also charge more for older travelers.
Find out about cancellation waivers: Cruise and tour operators may offer cancellation waivers. This means for a fee, they will reimburse you a portion of your cost if you cancel for any reason up to 24 hours before departure. Remember, waivers are not insurance policies and they are not regulated. Read all of the restrictions before you buy a cancellation waiver.