This article was first published in 2020 during the pandemic and is continually updated as travel-insurance and credit-card policies and practices change.

Travel planning these days often requires that you make a large, non-refundable, advance payment. Here’s how to protect your investment:

Does travel insurance protect me if a travel company ceases operations?

Some comprehensive travel insurance policies will reimburse you for trip cancellation or interruption due to bankruptcy or financial default of your travel supplier: an airline, cruise line, or tour operator, for example. Many such policies will not cover you, however, if the company you used to book your trip—a travel agency or other intermediary—goes out of business. This is one area where policies differ widely, so to confirm that your financial investment is protected, speak with a representative of the insurance provider whose policy you plan to purchase and explain your specific situation.

When do I need to purchase this insurance?

Within a couple of weeks after putting down your deposit toward a trip. One reason why is that coverage for financial default may be activated only if you buy insurance within 10 to 21 days (depending on the policy) after making your initial trip payment. You also usually can’t file a claim for cancellation due to financial default until 10 to 14 days after you’ve purchased the policy. Note that you may not be covered if your trip is years out: Some policies limit financial-default claims to trips taken within 12 or 15 months of purchasing your insurance.

Will the policy offered by my cruise line protect me if the cruise line goes out of business?

No. Some travel companies—cruise lines, tour operators, and such—sell their own insurance or “protection” policies. The premiums may seem attractive, but you will not be covered if that company financially defaults. Instead, you need the protection of third-party insurance—meaning, a policy written by someone other than the travel company that is operating your trip.

Am I protected if I pay by credit card?

If you don’t receive an item or service that you paid for by credit card, you can dispute that particular charge. But what if your airline goes under the day before your trip and you can’t find another way to get to your destination, so you’re out the $5,000 you spent on nonrefundable hotel reservations? In that case, your credit card provider will credit you the cost of the flights, but it won’t help with the hotel stays (because the hotels are still operating). A travel insurance policy with a financial-default clause, however, will cover all of your losses because you were forced to cancel your entire trip.

What other protection is available?

The broadest possible protection may come via “Cancel for Any Reason” insurance coverage. If you have concerns about the financial stability of a company you are planning to travel with, this insurance upgrade could allow you to back out of your trip and be reimbursed for 50-75% of your nonrefundable trip costs.

For more guidance on the right insurance for your particular needs, read How to Buy Travel Insurance: What It Covers, When You Need It.

 

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