Volcano Eruptions and Travel Insurance

(Dive Travel Business News - April 20, 2010) -- The havoc wreaked by a ash-spouting volcano in Iceland has forced many travelers worldwide to read the fine print in their Travel Insurance Policies.  Since insurers don't normally factor in a volcano's ability to shut down most of Europe as part of it's coverage, Travel Policy holders face a considerable amount of uncertainty as to whether or not they are camping in the airport instead of a hotel.

Travel Insurers have been swamped with huge call volumes from both U.S. travelers trying to get to Europe and those stranded in Europe. Is the traveler covered under its trip cancellation or interruption coverage when a volcano erupts?

To help determine whether a policy is covered or not, policy holders need to find out if the insurance provider classifies the volcanic ash cloud as a “natural disaster” or an “adverse weather” event. 

Most insurance policies cover adverse weather events that cause an airline to cease operations for a specific time period, usually 24 hours. Since natural disasters are not as common, some policy providers don't include natural disasters as part of coverage to keep premiums down. If a policy does not cover natural disasters, it's quite possible it does not cover the current ash situation.

According to Peter Greenberg's website, most most US insurers have decided that the wind carrying the ash should be considered as adverse weather, so a traveler should be covered by their travel insurance.  

However, many companies have determined that policies purchased on or after April 13, 2010—when the effects of the volcanic ash became a “foreseen event”—are not are eligible for trip cancellation, trip interruption or travel delay benefits. Some others, such as CSA Travel Protection and Access America, have a later cut-off date of April 15, 2010.

Another problem may arise if the travel insurance policy expires while abroad. According to Greenberg's site, most insurance policies will extend coverage to the traveler for seven days. With the ash havoc into its fifth day, time is running out for extension coverage. According to Travel Guard spokesperson, when coverage ceases, benefits may not stop. Trip cancellation and trip interruption coverage will usually continue after the extension although coverage for medical emergencies may not.

The travel insurance industry has now designated the eruption of the volcano beneath an Icelandic glacier as a "known event" so travelers can no longer purchase coverage for upcoming trips that may be canceled or otherwise impacted by the volcano.  Similar rules would apply to a hurricane once it has been named.

Travel Insurance is a relatively small portion of the total outlay for a vacation — typically 4 to 8 percent of the cost of the trip. (Note: Older travelers and those who take more expensive vacations can expect to pay the higher prices).

Trip protection is something travelers hope never to use but are grateful when they have to use it. Typical policies cover costs for delays, like extra hotel stays or the price involved in changing plans; the nonrefundable costs for interrupted or canceled trips; lost or stolen luggage; medical emergencies and even medical evacuation.

Extra protection is available through policies with "cancel for any reason" riders, which are more expensive. Some of these policies may not reimburse the full cost of a trip, so make buyers need to know how much coverage they're buying. Adventure travel and activities considered 'high-risk' like scuba diving usually require extra insurance on top of the standard policy.

TAKE- AWAY: Check the fine print.

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