Financial Default Coverage

What is Financial Default Travel Insurance?

Financial Default is a travel insurance benefit that’s designed to protect your trip costs in the event your travel supplier suspends operations due to financial circumstances. This benefit typically applies if your cruise line, airline, or tour operator goes out of business before or during your trip.

Some travel insurance plans will offer Financial Default within their cancellation coverage. Plans that include this protection may reimburse up to 100% of your prepaid, non-refundable travel expenses if you need to cancel or interrupt your trip due to financial default.

It’s important to note that not all travel insurance policies include this coverage. Exclusions, limitations, and eligibility requirements for this benefit often differ by policy.

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FAQs: Financial Default Travel Insurance

What Does Financial Default Mean in Travel Insurance?

Travel insurance companies typically have their own unique definition for financial default. Generally, financial default means that a common carrier or tour operator is forced to end their operations because they can no longer stay in business, regardless of whether or not they file for bankruptcy.

While this occurrence sounds rare, it’s more common than you may expect. As an example, one of Europe’s largest tour operators, FTI, filed for financial insolvency in 2023. This move impacted the travel plans for thousands of customers, leaving travelers from around the world scrambling to make new travel arrangements and recoup any related trip expenses.

What Does Financial Default Travel Insurance Cover?

If a travel insurance policy includes the Financial Default benefit, that means that supplier default is listed as a covered reason under the plan’s Trip Cancellation and Trip Interruption benefits.

If you are forced to cancel or interrupt your travel plans due to bankruptcy or financial insolvency of a travel supplier, you may be eligible for up to 100% reimbursement of your prepaid, non-refundable trip costs. This benefit typically extends to airlines, cruise lines, tour operators, rental car agencies, and other travel entities.

If your airline or other travel supplier suspends travel due to financial circumstances, but alternative transportation is available, some travel insurance plans will cover the change fee costs to book new airfare.

Am I Eligible for Financial Default Coverage?

The majority of travel insurance providers will include specific requirements that must be met before you’re deemed eligible for this coverage. Requirements for specific plans can be referenced anytime within a policy’s Certificate of Insurance.

To be eligible for financial default coverage, you may need to meet the following criteria:

• Purchase Date: As with other covered Trip Cancellation reasons, the related event must occur after your policy’s effective date.
• Time-Sensitive Purchase: Financial Default is a time-sensitive benefit under some plans, meaning you need to buy travel insurance within 10-14 days of your initial trip payment to be covered.
• Wait Period: Some plans may require a wait period, typically 10-30 days after your effective date, before coverage begins.
• Trip Payment: While rare, a travel insurance provider may require you to purchase a plan prior to making your final trip payment to be eligible for Financial Default coverage.

Do All Trip Cancellation Policies Cover Supplier Default?

No, not all travel insurance policies with Trip Cancellation coverage and Trip Interruption coverage will list supplier default as a covered reason. If you’re concerned about a travel supplier going out of business, you can reference the table below, or use Squaremouth’s “Financial Default” filter to find travel protection that meets your needs.

If your travel insurance coverage does not include the Financial Default benefit, you may have other options available. Cancel for Any Reason is an optional benefit add-on that will partially reimburse you if you need to cancel for a reason not listed in your policy. Some travel credit cards may also include financial default cancellation coverage.

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Please be aware that coverage and eligibility requirements for this benefit differ by policy.

Looking for a policy with Financial Default coverage?

Enter your trip information on our custom quote form. Once you receive your results, select the Financial Default filter to find the best policy for your trip with the coverage that you need.