Does Travel Insurance Cover Terrorism?

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Recent data indicate that most of you are ignoring the government's latest alert about increased terrorism activities in Europe. Instead, you're going ahead anyway. Some are planning to try to minimize risks, while others are scoffing at the "threat."

Certainly, as I've already noted, the government's statements have been long on generalities and very short on specific, useful suggestions. Still, many of you are a bit queasy about putting a lot of money up front for a trip you may later decide isn't such a good idea.

One traveler raised this question:

"We're about to put a big nonrefundable deposit on a rental in Tuscany for next spring. Right now, we're not overly worried about local threats, but we don't know what might happen between now and our departure date. Should we buy travel insurance, just in case?"

My short answer is, "Probably you should -- not just for the terrorist threat, either -- and if you do, buy insurance that allows you to cancel for any reason." Here's why.

Who Needs TCI

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. I recommend TCI to anyone who has a significant dollar value in prepayments and deposits that are either nonrefundable or carry a hefty cancellation penalty, especially if you make those payments months in advance.

Even if you're young and healthy, you never can be sure nothing will happen between the time you book and the time you depart that might make travel impractical or impossible. And even if nothing happens to you, you might also have to cancel if something happens to a sibling, son/daughter or parent.

To me, TCI is just sensible: For somewhere between 5 percent and 10 percent of the total amount at risk, you can protect yourself against a wide range of unforeseen circumstances that might make you cancel your trip.

Travel Insurance Details

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

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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