Trip Cancellation Insurance Explained

When planning a trip, especially an expensive one with non-refundable bookings, it's wise to think about trip cancellation insurance. It can help protect your investment if unexpected events force you to cancel. However, it's important to know that not all cancellation reasons are covered, so it’s essential to understand the basics of trip cancellation insurance.

Trip cancellation insurance is a type of travel insurance policy designed to cover specific prepaid, non-refundable travel costs if you need to cancel your trip. With this coverage, you can recover expenses associated with items, such as flights, hotel bookings, and tours. Additionally, coverage is typically provided for unforeseen events, including illness or injury affecting you or a travelling companion, family emergencies, severe weather conditions, unexpected job loss, and government-issued travel restrictions.

In Singapore, reasons for trip cancellations might also include health-related issues like outbreaks of diseases, family emergencies that require them to stay in the country, or sudden changes in travel advisories or regulations.

Most of the time, you can get trip cancellation coverage with a comprehensive travel insurance policy. Alternatively, this coverage may be offered as a complimentary benefit with some premium credit cards. For example, if you want the option to cancel your trip for factors beyond those typically covered, you can add a Cancel For Any Reason upgrade to your travel insurance policy.

>> Learn more: Best travel insurance with coronavirus coverage

Trip cancellation policies are designed to protect your financial investment in a trip when unforeseen circumstances force you to cancel. Let’s say you've planned a dream vacation to Japan, with non-refundable flights, accommodation, and tours totalling S$8,000. If, a week before your departure, you're hospitalised because of a sudden illness, trip cancellation insurance can help.

In this case, you would likely be able to get your prepaid, non-refundable trip costs back, as long as the entire amount was insured, since a serious illness requiring medical treatment generally qualifies as a covered reason.

Other common reasons covered by trip cancellation insurance often include the death of a travelling companion, severe weather disruptions, acts of terrorism, and unexpected job termination.

It's important to remember that this isn't an exhaustive list, and coverage is generally for cancellations due to unforeseen circumstances. So, always carefully review your travel insurance policy to understand the full scope of coverage. 

While trip cancellation insurance offers broad protection, it's important to be aware of its limitations. Generally, it doesn’t cover cancellations due to events you could have foreseen or those resulting from self-inflicted harm. Other common exclusions often include losses arising from participation in high-risk activities, involvement in illegal activities, or cancellations related to routine medical procedures.

>> Learn more: Compare the best travel insurance

Need the flexibility of cancelling your trip for reasons beyond those typically listed in a standard travel insurance policy? Cancel For Any Reason (CFAR) coverage offers that flexibility.

Often available as an optional addition to your travel insurance, CFAR allows you to cancel your trip even for reasons not specifically covered. However, it's important to understand that CFAR coverage usually involves some limitations on refunds, with most policies covering only 50% to 75% of your non-refundable trip costs.

The cost of trip cancellation insurance can vary considerably, and the premium you'll pay is influenced by several factors, including the overall cost of your trip, the length of your travel, your age, your destination, and the specific travel insurance policy you choose.

For example, if you're considering travel insurance trip cancellation for a two-week holiday to Japan, policies on SingSaver might range from around S$11 to over S$100. This could represent approximately 2% of your total trip expenses. 

» Learn more: How much does travel insurance cost?

While all policies will provide coverage for the trip cost, more expensive options often include higher limits on benefits, such as more extensive coverage for medical evacuation or higher claim limits. If you're primarily seeking trip cancellation coverage without needing extensive additional protections, a more budget-friendly policy might be suitable.

Some premium travel credit cards offer trip cancellation coverage as a complimentary benefit. For instance, the Citi Rewards Card provides complimentary travel insurance, which includes trip cancellation coverage. If you cancel a trip, you may be able to reimburse the costs of unused accommodations, leisure activities, and travel arrangements for $500.

Cards like this often offer a convenient way to get some level of protection as part of the card's overall benefits package. Beyond trip cancellation coverage, these premium cards may also provide other valuable travel-related benefits, such as trip interruption coverage, travel concierge services, and assistance with trip delays.

If you travel frequently and typically find yourself purchasing trip cancellation coverage, it might be worth considering applying for credit cards that offer complimentary travel insurance. Not only will you gain trip insurance coverage, but you can also enjoy other travel perks and potential rewards or statement credits that can help offset the card's annual fee.

Alternatively, you can purchase a standalone travel insurance policy directly from an insurance provider. This is a good option if the coverage limits provided by your credit card are insufficient for your needs, or if you require more extensive protection, such as comprehensive travel medical insurance.

While purchasing a separate travel insurance policy involves an additional cost, it generally provides a wider range of coverage and higher protection limits compared to the coverage included with many travel credit cards.

Choosing the right trip cancellation insurance depends on your specific travel plans and needs. If you're going on a trip with significant non-refundable expenses, such as costly flights, hotel reservations, and tours, and you primarily want to protect your deposit, a budget-friendly trip cancellation insurance policy might be suitable.

However, if you require more extensive coverage, such as comprehensive travel medical insurance, or if a basic plan through a premium travel credit card doesn't offer sufficient coverage limits, consider a comprehensive travel insurance policy from reputable providers. You can find information on some of the best travel insurance companies here, including providers like Allianz and AIG. Always compare different plans and carefully review the fine print to ensure you select the coverage that best aligns with your travel habits and provides the protection you need.

For example, with Singlife Travel Plus, you can expect the following:

• Trip cancellation coverage provides S$15,000 in protection (with S$1,500 specifically for COVID-19-related cancellations).

• For trip curtailment, the coverage amount is S$8,000.

• In the event of trip disruption, you can expect up to S$2,000 coverage.

• Coverage for trip postponement also stands at S$2,000.

• If you opt to cancel for any reason, you're entitled to S$5,000 coverage.

To truly maximise the benefits of trip cancellation insurance, especially those offered by credit cards, it's essential to use your card to pay for your travel and daily expenses. Remember, this is often what triggers the automatic coverage.

At the same time, when choosing from the best travel credit cards of 2025, consider your priorities, and here are some examples:

• Ideal credit card for earning air miles: Citi PremierMiles Credit Card

• Unlimited miles that won’t expire: OCBC 90°N Credit Card

• Luxury travel perks: HSBC Visa Infinite Card

• Comprehensive travel insurance coverage: The Platinum Card® from American Express