The True Cost of Canceling a Trip Without Travel Insurance

Planning your vacation is all fun and games until life throws you a curveball. 

A sudden layoff, family illness, natural disaster, or other unexpected circumstances can quickly derail your plans for a dream vacation.

If you’re forced to suddenly cancel your trip, having solid travel insurance protection can be a lifesaver, both financially and for peace of mind. 

Unfortunately, travel insurance is not often top of mind for people when planning their trip. Here’s a detailed look at how much canceling your trip could cost you out of pocket versus how much you could save if you have the proper travel insurance policy in place.

How Much Money Could You Lose?

According to 2024 claims data from Squaremouth Travel Insurance, the average trip cost for Americans was $5,861, resulting in a 25% increase in spending versus 2023.

With travel spending on the rise, Americans are increasingly putting their finances on the line if an unexpected circumstance requires a last-minute trip cancellation.

Apart from the increase in travel spending, the data also revealed that insurance claims reimbursements increased by 18%, meaning that Americans are also more frequently needing to make insurance claims for their trips.

What does all this mean? Apart from people spending more on their trips, people are more frequently requesting reimbursement for their trips, which points to an increase in the need for travel insurance.

This begs the question, “what would happen if I were forced to cancel my trip and I don’t have a travel insurance policy?”

$5,861 is what the average American could stand to lose if they are forced to cancel their trip without the proper insurance coverage to reimburse them. However, this is just the tip of the iceburg, as there are other costs associated with cancelling your trip.

Here’s a breakdown of what’s on the table when it comes to cancellations.

Flights

Flights are one of the biggest expenses when it comes to travel. Unless you have a flight insurance policy, most airline tickets are nonrefundable if you need to cancel your flight. While some airlines offer refundable tickets, these are typically more expensive, and unless you plan ahead, you may not have purchased this option. 

Budget airline or basic economy tickets usually are nonrefundable, and change fees and rebooking costs can range from $100-$750 per passenger. Depending on where you’re flying, how much your ticket costs, and how many passengers are on your itinerary, canceling, changing, or rebooking flights can quickly add up to expensive sunk costs.

Trip cancellation coverage that includes flight coverage can reimburse you for up to 100% of the total cost of your flights if you’re forced to cancel for a reason covered by your policy.

Prepaid Accommodations

Depending on where you’re staying, hotels and lodgings are typically the next highest expense for travelers, after flights. 

If you’ve planned ahead or are lucky enough to have a refundable hotel, Airbnb, or resort booking, then you may be in the clear for a last-minute cancellation. However, most hotels and Airbnbs these days are nonrefundable, which means you could be looking at a hefty loss if you’re forced to cancel at the last minute. Even if you have a refundable booking, last-minute cancellations can still cause you financial losses. 

Travel insurance policies with a trip cancellation coverage can reimburse you for up to 100% of your prepaid, nonrefundable accommodation expenses. This includes hotels, hostels, Airbnbs, resorts, vacation rentals, etc.

Tours and Excursions

Most people don’t realize that tours and excursions can also be covered by travel insurance.

Depending on the type of trip you’re taking, tours and excursions may be a large part of your trip cost. From Safaris to diving trips to deep-sea fishing, excursions, organized tours, and adventure activities can add up to a substantial part of the total cost of your trip. This is especially true if you’re traveling with multiple people and have booked tours or excursions for a group.

As an example, a high-end safari can easily add up to $30,000 for a small family. It’s important to consider these costs when evaluating how much money could be on the line if you’re forced to cancel your vacation for an unexpected reason.

Trip cancellation coverage can reimburse you for up to 100% of your total trip cost, including what you spent on tours and excursions, making it a worthwhile investment to consider.

Cruises

Within the travel industry, cruise lines are known for having some of the strictest cancellation policies. Most cruise lines don’t offer refunds, but in some cases, you may be able to get a voucher with the company to travel at a future date. That said, mini cruises stipulate that if you cancel within 14 days of your departure, you may end up forfeiting 75 to 100% of your cruise fare.

Cruises represent one of the most important types of trips to consider buying travel insurance for, not only due to the cancellation policies, but also due to the medical risks of being far out at sea with limited medical care on board. 

Comprehensive cruise insurance policies often include cancellation coverage that can reimburse you for the total cost of your cruise if you cancel for a covered reason, as well as comprehensive medical coverage to protect you at sea. 

Vacation Packages

Vacation packages are notoriously difficult for letting you get a refund on your purchase. Most vacation packages come with strict cancellation exclusions due to the fact that you buy them as a bundle of services with airfare, hotels, rental cars, and excursions all rolled into one. 

If you purchased a vacation package, we highly recommend considering buying travel coverage to ensure you can get a refund if you’re forced to cancel for unexpected reasons.

Unexpected Expenses from Trip Cancellations

Beyond the immediate costs of lost bookings, there are additional expenses you might not have considered:

• Rebooking Fees: If you’re forced to reschedule your trip, airline hotels and tour operators often charge rebooking fees to accommodate your new travel itinerary. If you’ve bought travel insurance, these fees could be covered under the policy.
• Last-Minute Bookings: Apart from rebooking fees, the cost of your new travel arrangements can be significantly higher than your original itinerary when booking at the last minute. For this reason, trip interruption coverage typically offers to pay up to 150% of your original trip cost when rebooking you.
• Visa & Entry Fees: If you’re traveling to a country that requires a visitor’s visa, you might not be able to get a refund for your visa application or entry fees, meaning you may have to pay twice if you’re forced to postpone your trip to a later date.
• Lost Deposits: If your travel arrangements require you to leave a deposit for things like a rental car, dining, reservations, or special excursions, cancelling at the last minute can cause you to lose these deposits as well.
• Out-of-Pocket Medical Costs: If you’re traveling to a location that requires you to undergo medical screening, get vaccinations, or special medication to visit the country, an unexpected cancellation can also cause you to lose money here, as these expenses are typically nonrefundable. 

As a reminder, a comprehensive travel insurance policy can cover all or most of these scenarios, depending on the policy coverage that you opt for.

How Travel Insurance can Protect your Wallet

Travel insurance is built to protect your finances and your health while traveling. Until the COVID pandemic, travel insurance was not top of mind for most travelers.

That said, when it comes to expensive trips, cancellation coverage should be a priority for all travelers. As we’ve highlighted above, there are ample scenarios where an unexpected trip cancellation can lead to heavy out-of-pocket costs without the proper travel coverage in place.

Here’s a look at the different types of coverage that can take over when you’re forced to cancel your trip.

• Trip Cancellation Coverage: This coverage reimburses prepaid, non-refundable costs if you cancel for covered reasons, such as illness, injury, job loss, military deployment, severe weather, and more.
• Cancel For Any Reason (CFAR) Coverage: This coverage is an optional add-on that allows you to cancel your trip for any reason under the sun and still receive a reimbursement of up to 75% of your total cost. This coverage is an extra expense but offers complete flexibility for cancellation.
• Interruption Protection: if something happens that causes you to cut your trip short, or change your itinerary due to a covered reason by the policy, trip interruption protection can reimburse you for your total trip cost, and even pay for updating your itinerary and rebooking you up to 150% of the total cost of your trip. 
• Travel Delay protection: If you’re delayed due to a reason covered by your policy, travel delay protection can reimburse you for out-of-pocket expenses and help you catch up to your planned itinerary.

Is Trip Cancellation Insurance Worth the Cost?

When you add up all the money that you could stand to lose when canceling a trip, travel insurance is well worth the cost.

For example, canceling a $5000 vacation at the last minute could mean losing every penny without insurance. However, spending 4 to 10% of your total trip cost for a travel insurance policy (roughly $200 to $500) means you could get all of this money back, plus other added benefits. 

Apart from canceling the total cost of your trip, rebooking fees, and new itinerary arrangements can add extra costs. That’s why a comprehensive travel insurance policy can reimburse you for up to 150% of your total trip cost if you’re forced to rebook. Based on our example, this means that the right travel insurance plan could pay up to $7,500 to fix the itinerary of your initial $5,000 vacation.

Apart from trip cancellation, interruption, and travel delay coverage, comprehensive plans come with a whole host of other coverages that are important for travelers, such as reimbursing emergency medical care, emergency medical evacuation and transport back to the US for treatment, rental car coverage, accidental death and dismemberment coverage, baggage insurance, and much more.

Ultimately, the value of having travel insurance is understood when it comes time to use it. Compare travel insurance policies using our quote tool to see plans and prices for multiple providers in one place.