Will You Receive a Travel Insurance Claim for Voluntarily Cancelling Your Maldives Trip?

Many citizens, including celebrities in India, are now posting on social media that they have decided to abandon their plans to the tropical destination and are actively encouraging others to opt for domestic beaches instead of Maldives, potentially leading to a widespread boycott expressing apprehensions about alleged racism and a push to endorse domestic tourism.

Are you too planning to cancel your Maldives trip and wondering whether your travel insurance company will provide you a refund? Read on to know the answer and understand how travel insurance claims work.

Travel insurance provides protection against various risks that may occur during your journey. It covers a range of potential disruptions, including the loss of a passport, flight delays or cancellations, personal injuries, and more. The absence of financial safeguards from travel insurance can result in unforeseen losses impacting your finances.

There are no limitations on the mode of transportation or the chosen destination when it comes to travel insurance as long as accurate details are provided when purchasing the policy. While travel insurance is commonly associated with international travel, it can be chosen for both international and domestic journeys. It is advisable to secure travel insurance from the commencement of your trip until your return home.

But will you receive the claim for voluntarily cancelling your Maldives trip? Travel insurers do not accept trip cancellation claims unless your travel insurance policy explicitly mentions it. Therefore, if you have bought a comprehensive travel insurance policy while booking your Maldives journey, you should check whether the inclusions in your policy include trip cancellation insurance.

Travel insurance typically provides claims for trip cancellation due to perils. Perils are unforeseen events like natural disasters, medical emergencies, government-imposed travel prohibitions, extreme weather conditions, or other unavoidable circumstances mentioned in the policy document called Named Perils.

Travel insurance plans typically include coverage for Named Perils, such as:

• Unanticipated death, illness, or injury of yourself and/or a travelling companion necessitating a physician's order declaring you unfit to travel

• Hospitalisation or death of a non-travelling family member

• Issues related to weather or airline

• Unexpected natural disasters, either at your home or the travel destination

• Legal obligations, like court appearances

It is necessary to understand that specifics can differ among insurance companies and individual plans. In the event of a necessary cancellation, reimbursement typically covers 100% of the pre-paid, non-refundable trip cost, provided you are insured and can furnish the required documentation. It is important to note that this coverage applies only when the trip is cancelled due to a specific, unforeseen, and covered reason.

Yet, if a person decides to cancel their trip voluntarily without reasons falling under Named Perils, the standard policy terms may not approve the claim.

Some policies now offer an additional coverage option called "Trip Cancellation Insurance" or "Cancellation For Any Reason (CFAR)". This supplementary coverage requires an extra premium and offers more comprehensive protection, enabling trip cancellations for any reason. However, while a few insurers are offering this coverage, it is largely restricted to domestic travel.

In case your policy includes trip cancellation insurance, your claim will be approved depending on the terms and conditions, which may include a minimum number of days before your intended departure for ticket cancellation.

Typically, the airline manages the situation internally and ensures passengers are not left stranded. Passengers can initiate an insurance claim only when the airline fails to provide compensation or alternative solutions.

In contrast to basic trip cancellation coverage, the Cancel for Any Reason (CFAR) benefit comes with specific eligibility criteria:

• It is typically only available within 10-21 days from the initial payment for the trip;

• You must ensure 100% of your pre-paid, non-refundable trip cost;

• Cancellation with the travel supplier should occur 48 or 72 hours before the departure date, depending on the specific plan;

• Benefits may cover only between 50% to 75%, depending on the policy.

With CFAR, the reason for cancelling your trip doesn't matter - you have the flexibility to do so. Many travellers opt for CFAR coverage, especially when heading to regions with civil or political unrest. This allows travellers to cancel if they feel uneasy about proceeding with the trip due to second thoughts, safety concerns, or any other reasons. Regardless of the cause, as long as you are outside the 48-hour window before your trip, you can cancel.

If the voluntary trip cancellation is mentioned in the list of exclusions/exemptions of your travel insurance policy, meaning you have not purchased the trip cancellation insurance add-on, you will likely not receive the claim.

If the cancellation of a trip is a result of the airline's inability to operate due to government regulations, the insurance company will assess the details and compensate for the cancellation as per the specified coverage amount, and the terms articulated in the policy.

Having said that, no airline has cancelled flights to Maldives due to the current circumstances, while certain travel agencies may have suspended flight bookings to Maldives.

In summary:

The escalating tensions between India and the Maldives, fuelled by social media outrage and the #BoycottMaldives movement, have prompted many travellers to reconsider their plans and advocate for domestic alternatives. Travel insurance, designed to shield against various risks during journeys, is contingent on specific policy inclusions. Standard trip cancellation claims are accepted only for reasons covered under Named Perils, such as medical emergencies, natural disasters, or legal obligations. However, voluntary cancellations may not be covered unless an add-on "Cancellation For Any Reason (CFAR)" is included, often with extra premiums. Understanding the eligibility criteria, terms, and coverage limits is vital. While CFAR provides flexibility regardless of the reason for cancellation, it is crucial to be within the specified timeframe and adhere to policy conditions.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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