Terrorism has travelers buying insurance, if not calm

Egypt may deny that Egypt Air Flight 804 was a terrorist target when it spun and crashed into the Mediterranean on May 19, but the fear among would-be international travelers is pervasive. And it's leading more and more of them to purchase travel insurance that includes protection against possible terrorism.

One of the three leading sites for travel insurance comparison, SquareMouth, has already put out nine alerts this year, and only one is aimed at natural causes. Seven warned of terrorism, and the other dealt with the Zika virus.

SquareMouth knows its audience. In one recent month, "the percentage of customers searching specifically for terrorism coverage increased 142 percent," said Content Manager Rachel Taft. SquareMouth has a special screening device that tracks how many customers are concerned about this.

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Another indication is trip cancellation policies, which typically rise nearly 20 percent in the month after a terrorist attack, such as the ones in Brussels and Paris (compared to the year earlier), according to Taft. That's an indication of how serious travelers are because a "cancel-for-any-reason" policy usually carries a hefty premium of about 40 percent more than the typical travel policy.

More expensive policies may be good news for the travel insurance industry and for companies like SquareMouth, InsureMyTrip and TravelInsurance that provide travel insurance comparison shopping, but does it prompt fewer people to get on a plane and fly abroad?

Well, yes, and no. Recent figures from the U.S. Department of Transportation's Bureau of Transportation Statistics show that international travel numbers have remained relatively the same this year as last year. This may have been buoyed by an increase in the number of people traveling to the U.S., which has picked up, according to the U.S. Travel Association. So clearly terrorism hasn't stopped people from flying.

But it has made a real difference in their destinations. Egypt's tourism business was already at a low ebb, but France, the victim of two separate attacks, has fallen from the third-most-popular destination last year to the fifth, according to SquareMouth's ratings of the number of people purchasing policies. Canada replaced France and saw a 43 percent increase.

Parts of Europe remain very popular. Spain had the most growth, with nearly a third more travel insurance policies. But Turkey suffered a 55 percent decline, SquareMouth said.

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Beyond terrorism concerns, the Zika virus has also affected travel. "We actually have fewer customers traveling to Brazil this August than last August," said Taft. But she said travelers could change their minds and buy a travel policy up to the day before they leave for the Olympics, so those numbers could increase.

Zika has also trimmed the number of travelers heading to Caribbean destinations like the Dominican Republic, Puerto Rico and the U.S. Virgin Islands. But the lure of going to previously forbidden Cuba is very strong. Travel insurance for Cuba is up 188 percent.

Overall, travel insurance buyers have gone up by 16 percent year-over-year and for popular destinations (Mexico is at the top) by 20 percent. This could be because most travel insurance policies now include a terrorism clause.

The Catch-22, however, is that simply suspecting terrorism was involved won't get your money back for the trip. This requires a "terrorism declaration" by the U.S. State Department. "And it may take a year before an event is officially labeled terrorism," warned Taft.

Europe on high alert after terror attacks

Even then there are limits on when, where and how you can collect. On March 22, after bombs exploded in Brussels' transportation hubs, the State Department did label it terrorism. Travelers who bought policies before March 22 were entitled to cancellation coverage, but only if their departure dates were within seven to 30 days of the attack. Their itineraries also had to include a stopover in Brussels or a town within 100 miles of that city.

"You have to read the contract and understand the parameters," said Taft.

Travel insurance generally runs 5 percent to 6 percent of the total cost of the trip and will cover emergency medical problems, travel delays, baggage loss and other mishaps. The more expensive cancel-for-any-reason policies provide much more protection, but they still won't give customers the option to just say "no" at the last minute and get all their money refunded. Generally, a 75 percent refund is the maximum.

This kind of policy also has to be purchased within seven to 30 days after you initially book your trip, as opposed to a typical policy that you can buy the day before. You must cancel it -- usually -- within two to three days before the trip, said Taft.

Lastly, getting cold feet due to what you just saw on TV isn't a valid excuse to cancel your travel plans. As Taft explained: "Just 'fear' is never covered."

  • Ed Leefeldt

    Ed Leefeldt is an award-winning investigative and business journalist who has worked for Reuters, Bloomberg and Dow Jones, and contributed to the Wall Street Journal and the New York Times. He is also the author of The Woman Who Rode the Wind, a novel about early flight.