Skip Navigation Links
Trip cancellation charge under travel insurance
14 May 2022 (158 views)  

An insurance company levied an additional premium of $40 to cover trip cancellation. In the event that the passenger cannot travel due to any medical condition, this cover will compensation the passenger for the air fare. 

The passenger wanted to book a trip to Indonesia. The airfare is $1,000. 

At present, the main risk is that the passenger is not allowed to board the plane after being tested positive for covid.

The chance of this occurrence is less than 1%. The real cost should be $10. Is it advisable to pay $40 to cover this risk?

It is better for the passenger to take the risk, i.e. to self insure. If the travel has to be canceled, the passenger loses the $1,000 fare. This is a modest sum that can be borne personally, There is no need to pay an additional premium of $40.

However, many people are not able to assess this risk. The want to be protected from this loss, and willing pay the additional premium. 

This is how an insurance company can make a large profit on travel insurance. 

Tan Kin Lian


Trip cancellation charge under travel insurance
[Back] [Print]


An insurance company levied an additional premium of $40 to cover trip cancellation. In the event that the passenger cannot travel due to any medical condition, this cover will compensation the passenger for the air fare. 

The passenger wanted to book a trip to Indonesia. The airfare is $1,000. 

At present, the main risk is that the passenger is not allowed to board the plane after being tested positive for covid.

The chance of this occurrence is less than 1%. The real cost should be $10. Is it advisable to pay $40 to cover this risk?

It is better for the passenger to take the risk, i.e. to self insure. If the travel has to be canceled, the passenger loses the $1,000 fare. This is a modest sum that can be borne personally, There is no need to pay an additional premium of $40.

However, many people are not able to assess this risk. The want to be protected from this loss, and willing pay the additional premium. 

This is how an insurance company can make a large profit on travel insurance. 

Tan Kin Lian