Trip insurance that covers operator default
 

If you're booking with a company outside of the US and they go out of business will basic trip insurance that says it covers "supplier bankruptcy or default" reimburse you? Or is there some loophole if you can't "prove" there is 100% cessation of business? I'm imagining how they'd try to get out of it if you can't really prove anything besides the fact that they no longer respond to calls or emails. I've emailed a trip insurance specialist but in the meantime before I hear his response I was wondering if you've had any experience with this topic.

The policies I'm looking at say they won't cover a travel agent's default if you book through them, it only covers a supplier going out of business. So if a company in Africa is providing the safari but booking you in at different lodges does that make them a travel agent rather than an operator or supplier for insurance purposes? I guess I really need to wait and hear back from the expert.

That's one reason life is simpler without insurance. Please let us know what you learn, thanks.

regards - tom

It was a while back but I did post here concerning a trip I had canceled when the company went out of business. It was an outfit here in the U.S. and my trip insurance did not cover me as they had to declare bankruptcy within a certain number of days after the cancelation. They did not and I imagine it would get even trickier to prove in a foreign country. So, just be sure and read your policy carefully.

I'm a lawyer, used to reading insurance policies, and I think the travel policies are written in a way to purposefully hide the fact that they don't cover very much. I never confirmed this with anyone, but I'm pretty sure the type of coverage you are referring to would cover you if, for example, you had a travel agent ("agent'") book a cruise ('supplier") and the cruise line "ceased complete operations" causing loss of the amount you paid. However, what you described doesn't appear to fit--the company in Africa you book through sounds to me like the agent, and the lodges are the suppliers. So if a particular lodge ceased operations that might be covered, but if the agent did, then I think you are out of luck. If you used a an agent to book with a safari company that has its own ground operations and the ground operator ceased business, that would more likely be covered.

Now, this is all my personal analysis, and I'd love to hear I'm wrong. I do buy trip insurance, but that is mostly to have the medical coverage and evacuation coverage it provides, as well as cancellation for the covered reasons. I usually rely on other methods for mitigating risk of supplier default.

Hope this helps.

In my case, I did have a travel agent book through a cruise supplier. They ceased operation but kept accepting new reservations for future cruises which never happened. I was on the first cruise of the year so the first to be canceled so consider myself lucky that after 6 months I did have my money returned by the cruise company. I would bet some of the later people who signed up did not get their money back. My insurance company insisted they were not responsible from the very beginning unless there was a declared bankruptcy and I believe it had to be done within a certain period after the cruise was canceled.

In the years I've been posting on this forum I can't recall any in-country outfitter (that have to be used for ground operations by law, regardless if booked outside of Africa)... that has gone belly-up.

Have some safari-goers put in claims to their insurer? Yes? For delays due to flights, baggage delay/loss, loss of personal items (your homeowners/renters policies should cover this), interruption of safari due to illness or death at home, own illness or other while on safari, etc... but not 'ceasing of business.'

If anyone can recall such an instance, do remind me!

I cannot recall any case where the agent went out of business AND the client lost out on their trip. The in-country lodge operators, etc. picked up the pieces in one case where a US operator and former poster here went kaput. But the clients ended up ok.

On my first Africa trip in 1994 I encountered people who had booked with a US agent, Flamingo, that suddenly ceased to exist and the clients were in Kenya with meaningless vouchers because Flamingo had never forwarded the money. The reason I encountered these people was because the places I was staying were putting them up and providing services anyway. Similar to the first instance.

Leslie S, I hope this is all hypothetical and not something you are actually experiencing.

Hmmm. Confusing. I think maybe the "cancel for any reason" provision might be a way to cover that situation (but I'm not a lawyer and not used to reading insurance policies!) but then you're getting into a pretty hefty premium. The other question is what does a credit card cover in that kind of situation. I'll be asking Capital One about that just to see what they say.

I always buy trip insurance - primarily for medical coverage like you traveler318. I've never worried about a company going out of business before and in this case I have no reason to doubt the company. I just started wondering "what if?"....mainly because the deposit will be paid over a year in advance. A lot can happen in a year!

So just as an update: I did talk to Capital One and was assured that if I charge a deposit today and the company goes out of business before the trip I would be able to dispute it and get fully credited. I tried to ask every question I could think of to rule out a loophole and it sounds like that is a viable option.

I'll still get trip insurance but mainly for medical emergency/evacuation reasons and not worry about the 'cancel for any reason' provision which would jack up the cost by 50%.

atravelynn, i didn't see your post above until just now - yes it's only hypothetical. When I told the TO in the US I got a quote from that I was going with the other country because the price was lower he mentioned concerns about booking with an African company and what would happen if they went under.

I don't have any reason to think this company is on the brink but just out of an abundance of caution I'll use my c/c and pay the extra fee for that and buy some peace of mind. The trip insurance route seems dodgier - they may need a higher level of proof of cessation of business and also do not insure for travel agent bookings (only suppliers are covered) which this Ugandan company might be considered since they are booking us in at different lodges.

TMI, right?!!

Leslie, are you sure the African tour outfitter will accept credit card for deposit and final payment? Most don't, though some that do will assess a fee for use of plastic which you seem aware... so then, go with your gut.

Came across the below link regarding 'low-balling' cost of a trip for reduced premium... interesting read:

elliott.org/the-troubleshooter/… .

The TO told you to be concerned about an African company going out of business? And what would happen if your American tour operator went under - you'd be lucky to get 10¢ on the dollar!

You could post the name of the company you are wondering about and get feedback.

Glad it is only a theoretical question.

sandi - yes this company does take c/c payments with an added 4% fee. That link of your just took me to his website but to deadend page.

sf7307 - true but one difference is with trip insurance needing to see proof of bankruptcy -- maybe you could show that for a US company but not foreign. Anyway, moot point for now if my c/c will reimburse if the service is never received.

The company I'm booking with (Churchill) I've only read very good things about and have no sense that anything could go wrong. I guess just in general, I'm trying to protect against the 'what ifs' which I normally do with trip insurance.

4% is not nothing but to buy some peace of mind it's not awful.

Leslie - sorry about that, copied from another site, but in summary about travelers who instead of insuring for their entire trip of $10,074, only did for $10K even*... ran into issues with the insurance company. It was eventually worked out, but an interesting occurence we should remember.

*as if over $10K the premium increased a bit.

Oh yeah, I remember something about that - the guy at the trip insurance website I buy through was explaining to me if I didn't cover the entire expense there were certain things the policy would then not pay for.

I'm considering just getting an annual policy for medical coverage while traveling and not insuring things like trip cancellation or flight delays. I don't want to jinx myself but in perhaps 20 trips over the years with insurance (at about 5% of the trip cost) we've only ever put in 2 small claims and one was denied.

Leslie, when we went to Egypt, we also opted to put the charges on a credit card and pay the fee, which was 3% at the time - I agree, that was worth the peace of mind.

Leslie -

For Medical/Evacuation ONLY, that even within the US if you/family travel often, take a look at MedJet who has an family policy for about $350/annual. Then, if/where/type of travel you only have to take cancel/interrupt, if you wish.

Great -- thanks sandi!!

I think on sandi's recommendation, we bought the 1-year family policy from MedJet before we went to SE Asia last year. I' m pretty sure we'll just keep renewing annually - their coverage is exceent, and the price comparable to others. My BIL and SIL had TravelGuard a few years ago when my BIL had to be evacuated from the Amazon and eventually flown to LA first ass (because he had to be flat on his back ( is that prone or suppine?) the whole way). TG paid the entire bill.

sf7307 - not sure about the prone or suppine, but I chuckled at the fact that your BIL had to be flow to LA first 'ass' :)

Leslie this is a great conversation & probably has made a few people think. I would be shocked if Churchill went under they are an established company & it would take a big event to make them close.

Hey Jules, thanks for the reassurance. I keep going back & forth about this. I HATE to throw away money on a tiny possibility of them going under.

It seems from the response here most people don't ever consider that when booking - and since a lot of in-country operators don't accept c/c's anyway that's not an option. My take is that trip insurance would not cover that kind of situation. Still don't know what I'm gonna do. Maybe just have faith in things going well!

Sandi :-))

sf7307 - yup! :)

The travel insurance benefit you’re referring to is called “financial default,” which is the complete suspension of operations due to financial circumstances.

There are a few things that are important to note about this coverage.

First, some policies require an operator to have filed bankruptcy in order to claim the benefit. Others do not require bankruptcy, as long as all operations have ceased. Be aware that many policies have a limit on the time between making the initial trip deposit and purchasing the coverage. Many policies also require that a minimum amount of time passes between purchasing the coverage and the financial default of an operator. Finally, review a policy's definition of “common carrier,” “travel provider,” or “tour provider,” as there may be differences in coverage based on this.

Now, to answer your question: In the event that you need to make a travel insurance claim under the financial default benefit, you would need to obtain some sort of statement or record which gave evidence of financial default. If you were able to book travel with a business prior to leaving home, chances are that they were legitimate and there should be a record of their financial default. Remember to keep receipts for all prepaid, non-refundable trip expenses because if you file a claim, you will be required to provide proof of payment.

All of the information you need regarding coverage stipulations and definitions can be found in your policy’s certificate.

squaremouth - i think that would be the problem: "you would need to obtain some sort of statement or record which gave evidence of financial default" if booking with a foreign company. So, that pretty much means trip insurance would not cover default in that scenario.

I'm feeling more & more like Tom, life is simpler without insurance!

Trip insurance is essentially useless IMHO. It does not cover operator default and has been explained above, insurance companies require proof of actual bankruptcy filing, something virtually impossible to get for a local operator in Africa. Your best bet is to charge everything to a credit card as the Banks are actually quite good in covering you in case of fraud.

Yes, but then you run into credit card issues -- do operators take them or not? Mine took only visa not mastercard. I ended up paying by paypal using my mastercard as the fund source in the hopes that it provided some protection vs. just doing a wire transfer. It will show up on my c/c as a charge by the safari company, not paypal and the c/c should treat that the same as a direct payment with the card. Fingers crossed this is all just for the sake of slight peace of mind and not really tested. Not sure how it would actually play out if default occurred.

When picking an operator, just strike off anyone who will not take a credit card. I refuse to wire money anymore given a bad experience a friend had last summer with an Operator in Kenya. Even the smallest local TO can find a way to accept a credit card, often through other larger merchants- of course the client has to pay the credit card swipe fees which vary by location. As long as the legal name of your TO is on the credit card receipt you will have a good chance of getting your money back if the TO defaults.

I'm thinking operators don't like CC because they have to pay a fee. Three percent?? Offer the operator who doesn't want CC an additional 2-3% and they might not have any more problems. I know we think using a CC is "free", same as cash. But any business that accepts CC adds a fee to the cost of their merchandise whether you pay by CC or cash.

regards - tom

I paid Lady Egypt by credit card, and was told in advance I'd have to pay the fee on top of the cost of the trip. I decided it was worth it to me.

cary999 - it's not only a service fee for use of plastic that an in-country tour operator considers, but also their country's banking rules/regulations. And, for those who will accept upon a client pushing them, often require a copy of the credit card - front & back. Does a client really want that info floating around for anyone to see?