Trip Cancellation vs Trip Interruption Insurance: What's the Difference

Being convinced of the wide range of benefits offered by travel insurance, a friend of mine wanted to get one for himself before he went for a Mediterranean holiday last summer. The problem for him arose when he was confronted with a choice between being covered for trip cancellation or for trip interruption. His confusion led me to believe that these terms might be a cause for dilemma for many others. This is what led me to write this article. With time, travel arrangements have become more and more expensive. According to an article published by Los Angeles Times in July 2017, airfare is further projected to rise 3.5%, hotel rates 3.7% and ground transportation, such as cabs, is expected to rise 1.6% worldwide in 2018, due to increased demand and rising fuel costs. The problem is that when you plan a trip, you need to pay for the major expenses, such as travel and hotel bookings, in advance. But what happens if you suddenly need to change your plans or even cancel them altogether at the last minute? You would possibly lose all the money paid as advance because it is not refundable in many cases. Why pay for a holiday you won’t take when you can invest in visitor’s insurance that will cover you against travel related incidents that could lead to trip cancellation or trip interruption. But what is the difference between the two terms?

Difference Between Trip Cancellation and Trip Interruption

According to data published by Statista, 75 million people visited the United States in 2015 and contributed $1.5 trillion dollars to the country’s GDP. Do you think this entire contribution was from people who had a wonderfully pre-planned American holiday? Probably not. The number of people who wished to visit US that year would have been much higher. Moreover, there might be travellers who intended to stay for longer in the US but had to cut their trip short due to some reason. A trip is said to be cancelled when you do not travel at all due to certain reasons. The reasons for trip cancellation could be an injury, illness of the insured or a family member or travel mate, natural calamities like earthquake and hurricane, financial emergencies like bankruptcy, financial default of the travel company, mandatory court appearance or stolen passport or visa. On the other hand, a trip is said to be interrupted if you do travel but have to cut the trip short, leaving much before your planned departure date.

Trip Cancellation Insurance

The “trip cancellation” benefit in a visitor’s or travel insurance covers the policy holder in case they need to cancel the trip altogether due to reasons that are mentioned by the travel insurance provider, prior to their departure date. The insurer will reimburse you for all the pre-paid, non-refundable trip expenses, such as airfare, hotel bookings, car rentals, etc. Do note that this coverage is applicable only during after you have purchased the travel insurance and till the date of your departure for the trip.

Trip Interruption Insurance

Once you have set out for the trip, trip interruption coverage comes into play. In the event that you have to end your trip and return home before your scheduled return date, due to almost all the same reasons as trip cancellation, you’ll get 150% reimbursement of all unused trip expenses. In fact, you’ll be paid for all travel arrangements, including one-way airfare needed to return to your home country, under this type of coverage. However, the policyholder will not be covered if depression, anxiety or other mental or psychological disorders, participation in unlawful acts and lack of enough financial sources to cover the remaining trip are the reasons for trip cancellation or interruption.