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How Travel Advisories Affect Travel Insurance

By Michael Camacho and Stephen Fine

What a difference a few months make. On January 24, 2020, the Government of Canada issued a Level 3 travel advisory for travel to the province of Hubei, China in relation to COVID-19. In the following weeks, COVID-19 has spread globally and the Canadian government has issued additional Level 3 or Level 4 travel advisories for travel to South Korea, Iran, and Northern Italy. On March 13, 2020, the Government of Canada issued a Global Travel Advisory to avoid non-essential travel outside of Canada until further notice.

This new health pandemic has served as a wake-up call for all travellers — and their insurance advisors. It is essential to check your destination before you leave to know the risks and be prepared.

Many travellers book their travel far in advance of the actual trip. Unfortunately, much can change between booking the actual trip and the departure date, from natural disasters to disease outbreaks, and even civil unrest and violence that didn’t exist at the time of the booking.

What you may not know is that travel insurance policies include language that can exclude trip cancellation and trip interruption (TC/TI) coverage if you travel to a region for which the Canadian government has issued a travel advisory, resulting in your insurance claim being denied.

Exclusions

Many TC/TI insurance policies have an exclusion for reasons, circumstances, and events that the traveller is aware of prior to purchasing their TC/TI policy — commonly referred to as “known events” — which may lead to a cancellation or interruption of their trip (this exclusion is not typically found on credit card coverage).

If your client was aware of a “known event” before purchasing their TC/TI policy that may cause them to cancel or interrupt their trip, a claim for that reason or event will not be payable. On March 5 and in the days following, several travel insurance companies announced that they have determined that COVID-19 is now considered a “known event,” and this applicable exclusion will be applied for policies issued on or after the date each travel insurance company made this determination.

As a result, for policies with trip cancellation and trip interruption benefits that were purchased on or after the date a travel insurance company announced they would consider COVID-19 to be a “known event,” any trip cancellation or trip interruption claims related to COVID-19 will not be payable.

For policies with trip cancellation and trip interruption benefits that were purchased before the date a travel insurance company announced they would consider COVID-19 to be a “known event,” policyholders will still be eligible to claim for trip cancellation if the Government of Canada issues a travel advisory that advises against non-essential travel (Level 3) or all travel (Level 4) for their destination related to COVID-19 prior to their departure date.

How do travel advisories work?

The Government of Canada employs a risk level system to assist travellers in assessing the threat in a particular country or region. Let’s examine the four possible risk levels:

Level 1: Exercise normal security precautions.

There are no significant safety and security concerns. The overall safety and security situation is similar to that of Canada. You should take normal security precautions.

Level 2: Exercise a high degree of caution.

There are identifiable safety and security concerns or the safety and security situation could change with little notice. Exercise a high degree of caution at all times, monitor local media, and follow the instructions of local authorities.

Level 3: Avoid non-essential travel.

There are specific safety and security concerns that could put you at risk. Reconsider the need to travel to the country, territory, or region. If already in the country, territory, or region, reconsider whether or not you really need to be there. If not, consider leaving while it is still safe to do so. It is up to you to decide what “non-essential travel” means, based on family or business requirements, knowledge of or familiarity with a country, territory, or region, and other factors.

Level 4: Avoid all travel.

There is an extreme risk to your personal safety and security. You should not travel to this country, territory, or region. If you are already in the country, territory, or region, consider leaving if it is safe to do so.

Travel Advisory Tips

As an advisor, make sure your clients follow these tips to reduce the likelihood of having a travel insurance claim denied due to a travel advisory and stay informed if a travel advisory is issued while they are travelling:

  • In light of the changes on how some insurance companies will be adjudicating trip cancellation/trip interruption policies, make sure clients read and understand the policy exclusions related to travel advisories before you purchase trip cancellation and interruption insurance. Is there a known event that could prevent them from taking their trip? If so, don’t expect the TC/TI coverage to apply.
  • Register online with the Government of Canada’s Canadians Abroad program before departing on the trip so the government can provide assistance like notifications about emergencies and travel advisories while travelling.

MICHAEL CAMACHO, MBA, CFP, CLU, CHFC, CHS, FLMI, and STEPHEN FINE, LL.B., are the co-founders of Snowbird Advisor Insurance Inc., www.SnowbirdAdvisorInsurance.ca, a travel insurance brokerage that specializes in assisting Canadians snowbirds, boomers, and seniors with their unique travel insurance needs.

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