Does Travel Insurance Cover Terrorism?

Travel Insurance Details

The Tyranny of 'Covered' Reasons and 'Named Perils'

In the event that you have to cancel a trip, trip cancellation/interruption insurance (TCI) covers any prepayments and deposits you can't first recover from the suppliers you paid.

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The main catch with most TCI policies is that they compensate you only when you cancel for a "covered" medical reason or a "named peril" event that is spelled out in excruciating detail in the policies' fine print. If your reason for cancellation is "covered," the policy pays off. If it isn't, "gee, sorry about that."

Sickness and Accident: Much of the fine print centers on sickness and accidents. Most policies cover you if something happens to you, a traveling companion or a close relative/companion at home, and the policies get quite specific about what and who fall under the various definitions. For the most part, the boundaries make sense. The one major bone of contention is often whether a nominally qualifying sickness that requires you to cancel is new or a "pre-existing condition." Although policies typically exclude cancellations for pre-existing conditions, many companies waive that exclusion if you buy the insurance as soon as you start paying for your trip. Given this sensible out, my take is that coverage for sickness and accident is pretty straightforward, with no serious gotchas, as long as you make sure to comply with the purchase restriction that waives the exclusion for pre-existing conditions.

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Terrorism: Cancellation for actual or potential terrorism is a different story. Although "terrorism" typically is included as a "named peril," details vary among issuing companies. In general, policies do not reimburse cancellations for terrorism unless an overt terrorist attack has occurred in your specific destination within a few weeks of your planned arrival. A few allow cancellation without a specific event, but only if the State Department has issued an official warning. Many policies cover terrorism only if you buy the policy within a week or two of the time you make your first payment, and many don't pay off if even a covered event is foreseeable at the time you buy your policy.

The State Department's current announcement is officially a "travel alert," a class of statement that is lower in the pronouncement hierarchy than a "travel warning." And, as far as I can tell, insurance companies are not currently accepting the current alert as a basis for cancellation. Moreover, coverage is not likely to kick in even if the State Department subsequently raises its existing alert into a warning.