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Tips for Buying Travel Insurance and Protecting Your Vacation

Jul 19, 2008
There are benefits and limitations to using a credit card to book a trip.

Buying a cruise ticket or a plane ticket isn't like making another purchase. If you buy groceries or shoes, you can pay the bill completely and walk away with your purchase in hand. You put down a deposit if you buy a car or a house. You don't pay the entire amount until you move or you drive away.

Credit cards work differently when you travel, however. If you need to make a reservation for a flight or a cruise, you pay in full and well in advance. If the carrier goes out of business before you travel, you may find yourself with little recourse against the carrier. You may not have any rights to try to collect your money.

Many travel professionals will warn their clients that there are few guarantees of getting clients what they want, where you want to go, and how you are going to get there. There are five steps that travelers can take to try to get their money back if the carrier goes out of business.

Step 1: Know Your Rights You don't have many rights when it comes to dealing with the airlines and cruise lines. You are at the carrier's mercy if your flight or cruise is delayed, canceled, or rerouted.

You may qualify for "denied-boarding compensation? if you are bumped from a flight. This means you may be eligible for a nominal cash payment, which is limited to $200 for domestic flights. You don't necessarily qualify for any money if your carrier goes out of business.

Step 2: Charge It Using a credit card can give you a federally guaranteed insurance policy if your carrier goes out of business. Additionally, using a credit card might be your only way to seek reimbursement.

The Fair Credit Billing Act gives people a way to appeal a charge that they made for a product that was never received. You can file for a refund if you paid for a trip on a credit card and the carrier went out of business. This appeal is only active for 60 days after you make the charge.

It's very risk to pay in advance with a check or cash. The Fair Credit Billing Act does not cover cash or checks and your options for getting your money back after the carrier goes out of business are much more limited.

Step 3: Wait If It's Possible Travelers usually receive encouragement to make their reservations early. For those who want to take a long trip or travel during peak seasons, booking in advance is the only way to get the dates and prices they want.

The problem with booking so far in advance is that, as we've mentioned before, the Fair Credit Billing Act has a short time period. You will need to file a written complaint within 60 days after you paid for the travel if your carrier goes out of business before you travel. If the ticket was paid for months ago and you've already paid the bill, you can't use the protections offered in the Fair Credit Billing Act.

Step 4: Compare the Carriers Available to You Airlines in the United States can establish their own policies about delays and cancellations. You can find each policy in the airline's "contract of carriage"; this is the contract between passengers and the airlines, and is available on each airline's contract. Some travelers carry a copy of the contract when they fly. This can enable them to become "experts" on the airline's obligations if there is a problem.

Cruise lines and similar carriers have similar contracts.

Step 5: Consider Paying for Travel Insurance A travel insurance policy can help you recover money that you've lost on a trip that was canceled when the carrier went out of business. Be careful to get a good policy, however, and not one that will only give you additional expenses and problems.

The best and most affordable coverage usually comes from independent travel insurers. Consumers who buy policies from the carrier may think they are covered when they actually weren't.

Travel insurance policies also can cover a range of problems. Those problems include medical emergencies, bankruptcies on the part of the carrier, and terrorist attacks. You should pay close attention to the coverage you buy. You should make sure that you read the fine print for any insurance policy that you buy. Here are some tips for evaluating your insurance even when buying with a rewards card:

* Compare the different policies and insurers available to you. You may want to look at websites that include insuremytrip.com and quotewright.com.

* Buy your policy through an independent insurer and not the carrier.

* Act quickly. You must buy many types of policies within weeks or even days of buying your tickets.

* Think about buying trip cancellation insurance if you are buying or putting a deposit for a trip many months in advance. This is especially true if your ticket is non-refundable. Doing this will give you coverage even after the 60 day limitation under the Fair Credit Billing Act has passed.

* Make sure that your carrier is covered by your insurance policy. Some policies limit the carriers they will cover. Also make sure that your policy covers "financial default? on the part of the carrier.
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