Purpose

• Of the many reasons you may need to cancel an upcoming trip, chances are none of those reasons will guarantee a refund of your prepaid trip costs. Trip cancellation insurance protects you in the event that you must cancel your trip, because of certain unforeseen events. These events may include a natural disaster that prevents you, your travel source -- the airline, cruise or tour operator -- from traveling. Sometimes your travel source may default on your trip or enter into bankruptcy, or perhaps you are involved in a car accident while driving to the port to start your trip. Trip cancellation insurance protects the money you paid for your trip in circumstances such as these.
  
  

Features

• Typically, trip cancellation insurance covers the cost of your nonrefundable fees when you must cancel your trip for circumstances beyond your control such as a death in your family or a natural disaster that prevents you from travelling. In addition to reimbursing you for nonrefundable fees for your cancelled or interrupted travels, trip cancellation insurance may also reimburse you for lost baggage. Some coverage may include cancellation reasons such as your employer required that you work on your trip dates, you or a family member became ill, or you missed a connection on your way to your final destination. Like your homeowner's insurance policy or your car insurance policy, you will pay a premium for the coverage you desire.
  
  

Consideration

• While many travel companies and airlines offer trip cancellation insurance, exercise caution when buying protection from the source of your travels. If your travel source experiences a financial default, you will likely have no coverage -- now you have not only lost your travel fees, you have also lost the money to protect those fees. Buy your coverage from a third party to ensure that you have coverage if your travel source goes bankrupt or defaults on your trip. Also, read your policy carefully and be sure that you are not purchasing coverage you do not need. For example, some companies bundle medical coverage with trip cancellation insurance, and you may already have this protection with your health care coverage.
  
  

Warning

• Note that trip cancellation insurance covers you for nonrefundable costs for specific cancellation reasons listed in your policy, and you may have to show proof of those reasons. Further, insurers require that you notify them within a certain time limit when the event that prevents you from traveling occurs. Not all insurers offer coverage for financial default of a travel source and those that do offer the coverage may have a specific list of companies for which they offer coverage.