Does travel insurance cover me if my airline or tour operator goes bankrupt?
If your travel agent goes broke, would you expect your travel insurance to cover for your financial losses? If you answered yes, you’d be wrong – but you wouldn’t be alone. No travel insurer covers the insolvency or bankruptcy of a travel agent. In fact, there are only a handful of insurers that cover insolvency of a travel provider such as a tour operator or airline.
Want to find an insurer that covers insolvency? Keep reading to see which providers in our panel offer this service.
Who covers insolvency?
Currently there are no travel insurers who cover insolvency of a travel agent. In part, this may be because travel agents are no longer required be members of the Travel Compensation Fund (TCF), which would provide compensation for travellers who suffered a loss when a travel agent collapsed.
While no travel insurer covers travel agent insolvency, there are a handful who insure against insolvency of travel providers such as an airlines, tour operators or accommodation. The levels of cover differ, so it’s important to read the PDS carefully before purchasing your policy.
|You’re covered up to your policy limits (available only if Silver or Gold cover is selected) if due to a financial default of a travel service provider:||Get quote|
|You are covered for financial default up to the policy limits if:||Get quote|
|You will covered for the costs of rearranging your trip if it is cancelled due to the financial default of the scheduled serviced airlines, hotels, resort operators, car and campervan hire companies, cruise lines, railway operators and theme park operators. Travel Insurance Saver will also cover you for your travel agent’s cancellation fees which you incur because of any of these financial defaults.||Get quote|
|You are covered up to the policy limits due to the insolvency of a travel carrier for:||Get quote|
How can people protect themselves against bankruptcy?
If a provider such as a tour operator or airline becomes insolvent, there are several ways you may be able to recover your money.
- The travel agent may be able to get a refund for you, or at least help you get home if you’re stranded mid-holiday
- If you paid for your holiday on your credit card, you may be able to request a chargeback from your credit card provider and have the money returned to your credit card
- If your travel insurance policy includes insolvency of a travel provider, you will be covered up to a certain benefit amount
However, there are no travel insurance policies that provide cover if your travel agent becomes insolvent. The only way to recover your money is by requesting a chargeback from your credit card company or being compensated through your travel agent’s insolvency cover.
Tips to protect yourself
Minimise your risk before booking your holiday by:
- Paying for it with your credit card
- Checking with your travel agent to see if they have their own insolvency protection cover
- Reading your travel insurance policy carefully to understand what you are covered for in such situations
If you are unable to recover your money any other way, some Australian states and territories have programs in place where you can claim compensation for losses to insolvent companies. You can find out more by contacting the ACCC.
Credit card chargebacks: What are they, how do they work and how long do I have?
Currently in Australia, a credit card chargeback is one of two ways you can get your money back if your travel agent goes broke. This is only because there are consumer protection rules associated with the use of Visa, MasterCard and American Express credit cards.
When you apply for a credit card for a chargeback, your provider will examine the evidence and if they find cause will reverse the transaction, which returns the money paid to your credit card.
As long as you purchased your holiday on your credit or debit card and selected "credit" when you paid, you have a good chance of being compensated for travel agent insolvency.
Common reasons for chargebacks include:
- Unauthorised transactions. Someone uses your credit card details without your permission.
- Duplicate processing. You are charged more than once for a purchase.
- Direct debits. A direct debit continues after you have cancelled it.
- Merchandise not received. You do not receive the merchandise or service you paid for (this would include travel agent insolvency).
While chargebacks can be a lifesaver, it’s important to remember there are time limits. These limits vary but generally you have between 30 and 120 days from payment to apply for a chargeback.
Don’t get caught out
With only a handful of Australian insurers covering travel provider insolvency and none covering travel agent insolvency, sometimes a traveller’s only recourse is to either use their credit card to pay for their holiday or find a travel agent with insolvency protection.
Before taking out a travel insurance policy, make sure you’ve checked if it covers provider insolvency at the very least.
Picture: Simon Cunningham, licensed under Creative Commons Attribution-NonCommercial-ShareAlike 2.0 Generic (image cropped)