Is Cancel for Any Reason Travel Insurance Worth it? We do the Math
Just so everyone understands, most travel insurance plans will not cover you if you cancel a trip because you’re afraid of contracting an illness like COVID-19. However, there is one exception: Travel Insurance with Cancel For Any Reason coverage. Cancel for any reason coverage (CFAR) will let you cancel a trip for whatever reason you want and collect money on a claim.
That sounds exactly like what a lot of travelers have been asking for… so why doesn’t everyone buy CFAR when they buy travel insurance?
For years people who are just introduced to the concept of CFAR have been asking that question. And then when the explanation comes, they understand why CFAR has been one of the most asked-about, but least purchased forms of travel insurance.
Downsides to CFAR Travel Insurance
While it’s true that Cancel For Any Reason coverage will pay your claim even if you cancel a trip because of a pretend hangnail, what you may not know is that CFAR will not pay you back all the money you’ve invested in your trip.
Instead, Cancel For Any Reason coverage will pay you a percentage of your insured trip cost, or penalty amount. Many CFAR plans, including the add-on to Generali’s premium plan, will only pay a percentage of the penalty amount if the trip is canceled.
Non-CFAR travel insurance will pay you back all of your insured trip cost if you cancel your trip for a covered reason. CFAR will only pay you back a percentage of your penalty amount if you cancel your trip for any reason.
See the difference? Traditional travel insurance has fewer covered reasons for canceling but can pay back everything; travel Insurance with Trip Cancellation For Any Reason has an infinite number of covered reasons but only pays back a percentage of the penalty amount.
And when we say “percentage,” we don’t mean 90%; we mean 50% – 75%. Though in the wake of the Coronavirus pandemic, 75% CFAR plans have largely gone away.
The other thing that you need to remember about CFAR plans is that you pay a lot more for them than for non-CFAR plans – as much as 50% more. Plus, there are strict requirements that must be met in order to qualify for the coverage add-on.
Cancel for Any Reason Doesn’t Add Up
So let’s do the math on all of that to see if travel insurance with Cancel For Any Reason coverage is really worth it.
Suppose your trip has a trip cost of $1,000, and you paid a $500 deposit when you bought the insurance. And let’s say the insurance plan costs $100, or 10% of your insured trip cost – a little low for a CFAR plan, but close enough for our calculations.
Remember, you only paid half of the trip cost, so you have $500 left to pay. If you cancel your trip before making your final payment, you’d only receive 60% of the $500 you paid initially – and you still might owe the final payment to your travel supplier.
In other words, you will have paid $100 plus $500 for the ability to get back about $300 for whatever reason – with the specter of paying another $500 down the road.
Even if you buy a CFAR plan because you’re afraid of getting COVID-19, spending $1,100 to get back roughly $300 doesn’t seem like the best way of addressing your fear. This is why many people ask about travel insurance with cancel for any reason, but only a handful actually buy the product.
Not Convinced by CFAR?
If you feel the list of covered reasons for cancellation are too restrictive with most travel insurance plans, but you don’t want to go the CFAR route, what can you do? Here are some suggestions:
Buy non-CFAR travel insurance anyway
Two big fears that cause people to consider CFAR are fears of terrorism or disease epidemics. These fears can be managed in large part by carefully choosing your destinations and travel modes.
You can check global health statistics to determine places where pandemics rarely occur (Iceland, for one). And the State Department website and other resources list destinations that are largely free from the threat of terrorist attacks (Iceland again). Next thing you know, you’re going to Iceland. Problem solved.
And if you buy travel insurance for that trip, you’ll have coverage for medical emergencies, lost luggage, and a wide range of circumstances that might cause you to cancel or interrupt your trip. (However, not fear of contracting COVID-19.)
Travel only to places where expenses are fully refundable
This probably means you’re doing a road trip and staying at motels, but at least you’ll know that if you cancel you can get back what you’ve spent on reservations.
You may wonder why there aren’t more fully refundable travel options. The reasons are the same as the reason why there’s CFAR: It’s hard to successfully create a product that reimburses people when they get scared and choose not to do something they’ve already paid to do.
That’s the essential conundrum of CFAR, but also the reason why it continues to be a travel insurance option that’s worth it for certain trips.