Travel insurance during the pandemic

Photo credit: Javiki (Pixabay)

Travellers who ignore government recommendations during the pandemic do so at their own peril. Here’s what travel insurance will look like, and what precautions travellers should take.

About 30 percent of Canadian snowbirds will be returning to their condos in Florida, Arizona and the Caribbean this winter despite the pandemic. While some snowbirds will be spending their first winter in years sitting by the fireplace, those who head south will be taking their chances: if they get sick, they may not have enough health insurance to cover their medical care.

“A lot of people will decide against going south this year because either they are uninsurable or they won’t have as much coverage as they would like,” says Lyne Duhaime, Senior Vice-President, Market Policy and Regulation, for the Canadian Life and Health Insurance Association (CLHIA) and President of CLHIA Quebec.

She urges all travellers to be cautious.

Insurance companies applied government regulations on travel strictly in the spring of 2020. By the summer, they’d started to open the floodgates and issue new policies. “It’s still a smaller market than before the pandemic. Travellers will be able to get insurance, but it won’t be great.”

Just one thing is certain at the moment: travel on cruise ships is not insurable. In March 2020, the Government of Canada issued an official “avoid all travel” notice, the famous Level 4 warning, to Canadians considering taking cruises.

That warning means travellers do so at their own risk, with no possibility of getting coverage of any kind, pandemic or no pandemic.

All other travel in all countries falls under the “Level 3” warning, “Avoid nonessential travel,” which allows travel only for work or family emergencies. While some insurers limit their coverage to the strict definition of “essential,” others do offer coverage for nonessential travel. Some insurers offer COVID-specific coverage.

To attract tourists, some airlines also offer customers COVID coverage. But travellers should inquire about the specifics of this coverage before departure. If the coverage applies only to COVID, they will need to obtain another policy to cover all other medical treatment.

While some travel destinations cover medical care in case of illness, that is not the same as insurance, warns Duhaime. “In this case, travellers will be treated at the country’s expense, within its medical system and according to its own standards. They will not have the option to be repatriated.”

Contrary to what is generally believed, the pandemic did not bring about new restrictions on existing insurance policies: existing restrictions were just applied more rigorously. “There has been no change in the contracts. On the contrary, at the beginning of the pandemic, the contracts conformed to the Canadian government’s travel warnings,” explains Duhaime. However, later on, in the summer, insurers decided to loosen their rules to attract customers and started adding new clauses (called “endorsements” in the jargon). According to the Autorité des marchés financiers, a Quebec organization that analyzed the insurance policies, these endorsements may override government exclusions, cover COVID-related illness or clarify other details.

In principle, when an insurer amends a contract in a way that reduces its commitments to the insured party or increases the insured party’s obligations, it is legally obliged to notify policyholders of the change. In such cases, the insurer must obtain the policyholder’s written consent. However, insurance companies aren’t required to notify policyholders if an amendment improves coverage. Group insurance policies are another story. In this case, the organization representing the group becomes the “policyholder,” and it is up to that organization to inform members of the change.

 

Understanding the risks

The pandemic has introduced many new variables into travel insurance policies, to the point that it is almost impossible to generalize about them. Travellers should go over the conditions of their policy carefully with their insurer’s customer service department. Policyholders should examine two major components of their contract: exactly what coverage is being offered, and the rules for cancelling or interrupting a trip.

The most important thing to check is the amount of the coverage. According to the Autorité des marchés financiers, insurance products usually offer $3 million to $5 million of coverage for emergency medical expenses. Consumers should be cautious if they are being offered only $200,000 or $300,000 of coverage. This is particularly true for travel in the United States, where hospitalization costs can be $10,000 to $12,000 per day.

In other words, consumers have to be the judge of what they can afford to pay for medical care if the cost of their medical treatment turns out to be higher than what their policy covers.

When shopping for an insurance policy to cover COVID, consumers should check whether the policy covers other illnesses as well, and for how much. “You might be covered for other risks, like a heart attack, but the coverage won’t be as much as it was before the pandemic,” says Duhaime.

Trip cancellations or interruptions are unlikely to be covered during the pandemic, simply because the probability of cancelling a trip is too high. A few slight symptoms may be enough to prevent a traveller from boarding a plane. If that happens on a return trip, the traveller may end up spending weeks in a hotel, which would be costly. Insurance companies will take this possibility into consideration in covering trip interruption, so travellers should check the conditions of their policy carefully before leaving.

The CLHIA recommends that travellers purchase trip cancellation coverage for “any reason” just to be on the safe side. Although this kind of coverage will be more flexible regarding reasons for cancellation, it may end up costing more. As well, some reasons for cancellation may be ruled out, such as “concern” about risks of infection. This would be problematic if the public health situation in a country were to grow worse over the course of a trip.

In short, nothing about getting travel insurance will be easy over the course of the pandemic. Even savvy vacationers with iron-clad insurance policies could end up in a fix if they’re not careful. Governments could close borders at any time, impose new restrictions or even order tourists to leave without notice.

The best insurer in the world can’t control medical systems or conditions for repatriation, particularly during a pandemic, when hospitals are overcrowded and there are fewer flights. The CLHIA recommends that all travellers be prepared to return to Canada quickly if the Canadian government raises the risk level of their destination or prohibits nonessential travel – a situation that could jeopardize coverage for anyone who stays away too long.

So on that note, bon voyage!