People who had travel insurance in 2020 found that their policies offered little protection against the global pandemic that dramatically upended trips all over the world.
So what kind of reassurance does travel insurance provide in 2021?
Given the fine print and complexities around insurance, the answer isn't straightforward, but the bottom line is that US consumers can expect more benefits out of their travel insurance going forward than they did before.
And following a year that brought travel to a crawl and decimated the industry in the wake of Covid-19, that's good news for globetrotters eager to get back out into the world.
Sales of travel insurance in the United States were booming before the pandemic.
According to a US Travel Insurance Association study released in 2019, Americans spent nearly $3.8 billion on travel protection in 2018 including on policies for trip cancellation and interruption, emergency medical and medical evacuation. This number was a 40.9% increase from 2016, the study said.
The coronavirus pandemic was an unprecedented event, and when it hit, according to Megan Moncrief, the chief marketing officer for the travel insurance comparison site SquareMouth, very few policies protected travelers from the financial losses they saw from not being able to travel or having their trips interrupted.
This is mainly because many policies didn't include coverage for pandemics.
"A handful of policies covered trips that were impacted by government issued travel alerts and CDC alerts, but most travelers who bought insurance weren't covered by their policies," says Moncrief. "They saw losses left and right."
Adapting policies to include Covid-19
Moncrief says that changes in the industry started when Covid-19 became widespread in the United States in March. "Companies began to reevaluate their policies and react to what was happening in the world," she says.
Today, many of the biggest providers such as AXA Assistance USA, Berkshire Hathaway Protection Plan, Seven Corners and Generali have changed their policies to consider contracting Covid-19 unforeseen, like any other illness or virus.
In fact, of the 20 providers on SquareMouth's website, 19 provide medical benefits to a traveler who is diagnosed with the virus during their trip, as long as they bought the policy before their diagnosis. Further, 13 include cancellation coverage for contracting the virus before a trip.
But beware, says Stan Sandberg, the co-founder of the travel insurance comparison site TravelInsurance.com, that the standard trip cancellation and medical policies currently on the market protect you from financial losses only if you contract Covid-19.
"Required quarantines, even if they're imposed after you've booked and paid for you trip, are not covered," he says, referring to mandatory quarantines that might be imposed by destinations on all incoming travelers.
There is a caveat, according to Sandberg: some trip cancellation policies cover quarantine if you contract the virus while you're traveling. This means that if you're in Mexico and contract the virus while you're there and have to quarantine, you would have coverage.
"Under a cancellation policy, you get trip interruption coverage which would pay for the added expenses of the quarantine such as additional nights for a hotel or the extra costs of rebooking your flight," says Sandberg.
The coverage is even applicable if you're traveling with a friend or family member who contracts Covid-19 and have to quarantine as a result, says Sandberg.
Medical evacuation, as in the past, is also included in most travel insurance plans, according to Suzanne Morrow, the director of product and services for the travel insurance comparison site InsureMyTrip, but that doesn't mean you'll be going home. "In many cases, you'll be evacuated to the nearest medical facility which may not be your first hospital of choice," she says. "It all depends on the plan."
CFAR: 'Cancel For Any Reason' insurance
To Sandberg's point, policies that now consider Covid-19 an illness that may cause a trip to be canceled still don't cover all Covid-related travel issues.
These could include new quarantine requirements on arriving travelers that cause changes of heart about trips or a general concern about traveling because of rising cases.
The best way to protect yourself in these situations is to buy a Cancel for Any Reason policy, known in the industry as CFAR. This policy increases your premium by about 40% -- a standard $1,000 cancellation policy, for example, would increase to $1,400.
Also, CFAR typically only reimburses travelers 75% of the cost of their trip, compared with the 100% that a cancellation policy does.
Despite the higher cost, Moncrief and Sandberg recommend CFAR to travelers who have any Covid-related concerns.
"It's your only safety net," says Moncrief. "It's also the simplest policy because you have less to prove when you're trying to get your money back."
CFAR policies have become far more popular since the onset of the pandemic than they were before.
SquareMouth saw a 500% increase from 2019 to 2020 in travelers who bought CFAR insurance, and at TravelInsurance.com, the policy now accounts for more than 30% of the site's sales, compared with less than 10% pre-Covid-19.
Morrow, of InsureMyTrip, says that while sales of its travel insurance overall are down 80% compared with a year ago, CFAR is continuing to sell. "The people who are buying insurance are going for CFAR," she says.
The money factor
The new standard travel insurance policies may be more comprehensive, but they're not necessarily pricier, according to our experts.
In general, a typical trip cancellation policy costs 7% to 10% of the total trip cost -- coverage for a $10,000 trip, for instance, would run between $700 and $1,000.
As of now, policy rates haven't increased, says Moncrief, even if they have expanded to include Covid-19 as an illness.
Also, the new Covid-19 variant isn't excluded from the policies.
Destinations requiring medical insurance
Before the pandemic, destinations rarely required medical or travel insurance for incoming travelers. That's fast changing with a growing list of nations including Costa Rica, the Bahamas, Jamaica and Aruba now mandating coverage as a prerequisite for entry.
"If you get sick in a country when you're there, you tax the medical system, and you may not have the money to pay your medical bills or other expenses," says Sandberg. "Having medical insurance gives countries protection in the event that this happens."
The requirements vary by destination. For international travelers going to Costa Rica, for example, it's mandatory to have travel insurance that covers their accommodations for at least $2,000 in case of quarantine and for at least $50,000 for medical expenses connected to Covid-19.
The Bahamas includes insurance as part of its Travel Health Visa. It costs between $40 and $60 and also includes proof of a negative Covid-19 test.
It's also worth noting that Medicare and workplace provided insurance policies in the US often don't provide full coverage overseas. So while some countries are requiring that travelers get some coverage, it's also worth considering -- now more than ever -- getting additional medical coverage wherever you go.
Just as they did with Covid-19, insurance providers are adapting their policies to meet the requirements destinations set forth.
AIG Travel Guard, for instance, has a policy that now meets the criteria for Costa Rica, according to Morrow.
Overall, the travel insurance landscape is still changing amid Covid-19 and will likely continue to do so over the next few years, according to our experts.
"Nothing like this pandemic has ever happened before," says Moncrief. "It's going to take some time for the industry to fully adapt."