(NerdWallet) – You probably long to sip umbrella drinks by the beach while soaking up some vitamin D on a vacation, but exposure to the coronavirus could have you drinking those cocktails behind closed doors.
Even in the vaccine era, the coronavirus continues to impact vacation plans. One exposure at home or abroad can lead to a canceled trip or an extended quarantine stay for you and your travel companions.
Of Americans who had travel plans in 2021 and either they or someone in their household tested positive for COVID-19 or was exposed to it, two-thirds (66%) had their travel plans impacted by the exposure, according to a February NerdWallet survey.
Though you plan vacations with optimism, it’s critical to be prepared for potential emergencies that may derail an itinerary. Here’s how you can protect your vacation budget from COVID-19 disruptions.
1. Book travel with a flexible cancellation policy
The most economical option is to book airfare, accommodations or car rentals with a flexible cancellation policy. Most airlines with flexible cancellation policies, for example, issue a credit for canceled bookings that must be used within a certain time frame. You’ll only have to pay the difference if the cost of the fare changes. Some hotels with flexible cancellation policies may allow free cancellations with short notice if you’re traveling to certain countries.
Before booking, read the terms carefully to understand the policy and its limitations. For instance, you’ll need to know if basic economy fares on an airline can be changed or canceled for free.
2. Book travel with a credit card that has trip cancellation insurance as a benefit
Typically found on travel credit cards with an annual fee, trip cancellation and interruption insurance may reimburse you if your trip is canceled for a qualifying reason. Check your credit cards to see if any of them carry this benefit. Trip cancellation and interruption insurance is underwritten by an insurance company and offered on some cards issued by payment networks like American Express, Visa and Mastercard.
Of Americans who had travel plans in 2021 and either they or someone in their household tested positive for COVID-19 or was exposed to it, slightly over 1 in 7 (15%) say they canceled their trip and filed a claim to use their credit card’s trip cancellation benefits.
By booking a vacation with a card that offers trip cancellation and/or interruption insurance, you might be eligible for reimbursement of prepaid, nonrefundable travel expenses like airfare, hotels, cruises, tours and passenger fares, depending on the terms. If your trip is interrupted for an eligible reason, you may be reimbursed for down payments made on the unused portion of the trip. Terms vary. Depending on the card, the coverage may be secondary to any travel insurance policy purchased or any reimbursements received from the travel provider or carrier.
“Your credit card may cover you not only if you test positive for COVID and have to cancel, but if your travel companion gets sick, too,” says Sara Rathner, a NerdWallet credit cards and travel expert. “You won’t be left traveling alone and footing the entire bill for shared bookings if the other person has to isolate at home.”
3. Purchase travel insurance
Some travel insurance providers don’t cover some COVID-19-related incidents, so it’s important to seek coverage that works for you. Read the terms of the different plans you’re considering carefully to understand what is offered.
Explore Cancel For Any Reason coverage
The best bet, in some cases, is to pay to add on “Cancel For Any Reason” coverage, which provides a partial reimbursement regardless of the reason for skipping your trip. With this type of coverage, it’s typical to get a partial refund of 50% to 75% of upfront payments, according to the National Association of Insurance Commissioners.
“Cancel For Any Reason coverage is pricey, but it can come in handy for those very expensive vacations where you prepay for many of the costs,” Rathner says. “Getting at least $2,500 back on that $5,000 trip isn’t going to make you completely whole, but it’ll certainly soften the blow of having to cancel your plans.”
Unlike a flexible cancellation policy or a trip cancellation/interruption benefit on a credit card, purchasing travel insurance has a cost attached to it. If there’s any chance that a trip isn’t set in stone or you want the flexibility to cancel for a reason not covered by other options, it might be worth considering the Cancel For Any Reason add-on. Limitations still apply. For example, you’ll likely have up to a certain date to cancel a trip to remain eligible for coverage, and the insurance provider will not reimburse claims if you’ve received a voucher or credit from an airline or hotel for a canceled vacation.
Factor in unforeseeable medical expenses
Beyond covering the cost of a canceled trip, a travel insurance policy may also cover medical expenses if you have to quarantine abroad due to COVID-19 exposure. It could mean that those extra hotel nights over several days don’t come entirely out of your pocket. If you have to quarantine for several days, that cost quickly adds up.
Go with the option that makes the most sense for your circumstances and your budget.