Why travel insurance may not protect you in the government shutdown
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More consumers are purchasing travel insurance during the federal government shutdown; however, these insurance policies may not offer the all-encompassing protection buyers expect.
Experts said much depends on the fine print.
Squaremouth, an online platform that compares travel insurance policies, saw the volume of insurance quotes increase 8.5% year-on-year between October 1 and 27. Sales increased by 7.9% in the same period.
Buyers seem hedging Experts said they were taking precautions against the financial risk of a government shutdown that would disrupt travel plans. Air traffic controllers and TSA agents are essential government employees who work without pay, and travel has been disrupted in previous shutdowns.
Hopper, a travel site, saw purchases of “interruption assistance,” which offers certain protections in the event of flight cancellations or delays, increase 35% between mid-September (before it shut down) and early October (after it started).
“We see this over and over again when flight delays or cancellations are in the news too frequently,” said Patrick Steadman, Hopper’s head of disruption assistance.
Travel delays are already on the rise
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“Essential” workers such as air traffic controllers and TSA agents worked without pay during the shutdown, while others were furloughed. This increases the possibility of staff shortages and resulting delays at the airport.
The shutdown, which began Oct. 1, is already the second-longest shutdown in U.S. history.
Meanwhile, the end-of-year holidays, historically one of the busiest seasons for travel, are quickly approaching. For example, more than 3 million people scanned A single-day record was broken at US airports on the Sunday after Thanksgiving in 2024.
Nearly 45 percent of Americans plan to spend money on flights or hotels this holiday season, according to NerdWallet questionnaire It was published in October. It turned out that they expected to spend an average of $2,586 on such expenses, for a total of $311 billion.
“After all, [travel] “Once TSA starts missing paychecks, airport lines (and coverage) will likely push for resolution as they have with previous shutdowns,” Washington Research Group strategist Chris Krueger wrote in an Oct. 29 note.
Already understaffed air traffic controllers missed their first paycheck on Tuesday.
The longest U.S. shutdown during President Donald Trump’s first term in office lasted 35 days and ended after a shortage of air traffic controllers in the New York area disrupted air travel. TSA screeners said there were so many patients because they were asked to work for free.
What does travel insurance cover and what it doesn’t cover?
Flight delays or cancellations may, in certain cases, result in consumers incurring unforeseen costs for accommodation and meals or missing out on pre-paid activities, such as tours.
However, travel insurance will not always cover consumers against such costs if the closure negatively impacts travel plans.
For example, travelers who miss a flight because they get stuck in a long airport security line likely won’t be covered, said Terra Baykal, senior marketing manager at travel insurer World Nomads.
It recommends people arrive at least three hours before departure, even for domestic flights, as long lines remain closed to prevent travel derailment.
Baykal said World Nomads’ insurance sales usually drop this time of year, but they fell less than usual with the shutdown.
Baykal said the company saw a 17 percent decrease in U.S. travel insurance sales in 2024 from the period of September 5-30 to the period of October 1-26. Baykal said that there was a smaller decrease of 10 percent this year, which indicates that there was more demand during the closure period.
Chrissy Valdez, Squaremouth’s senior director of operations, said travel insurance should cover largely unforeseen events.
But Valdez said the closure is now a predictable event. This means policies purchased on or after October 1 will likely not cover certain claims.
For example, a federal employee who purchased travel insurance after Oct. 1 and was later laid off or furloughed because of the shutdown may not be able to cancel their trip and receive insurance benefits under the “cancellation for business” clause, Valdez said.
Experts said travelers may, in some cases, receive indirect coverage during the shutdown, depending on their insurance policies and the airlines’ reason for flight disruption.
Valdez said most insurance companies require a “common carrier” deductible, such as a mechanical failure, in order to pay benefits.
As long as an airline classifies any disruption, such as a lack of air traffic controllers, as a “common carrier” delay or disruption, passengers may be eligible for insurance reimbursement. wrote Squaremouth spokesperson Lauren McCormick said in a recent blog post.
“Even during the government shutdown, many travel disruptions are covered under the ‘common carrier’ category,” he wrote. “Essentially, this is a loophole that allows you to request a refund as an indirect result of the closure,” he added.
Travel insurance policies also generally have caveats and limitations, such as dollar limits on certain benefits and a requirement that the delay last a minimum period of time.
Some optional policy benefits, such as “cancel for any reason” provisions, can provide additional flexibility to travelers who want to cancel an upcoming trip rather than risk the headache of a delay or cancellation, World Nomads’ Baykal said.
But these benefits also come with caveats: For example, many insurance companies require policyholders to cancel at least two days before their trip begins. Insurers also generally do not reimburse policyholders for the full cost of travel; Baykal said that, for example, they can cover 75 percent of non-refundable travel expenses.
“We would always recommend that a customer read the policy details if they come to the point of making a claim,” he said.
Separately, airlines have made various financial commitments to passengers experiencing flight disruptions. dashboard It is maintained by the US Department of Transportation.
