Not all travel insurance protects against airline default

George Hobica, July 10, 2008
Fares from Washington DC:

    Q. Just before I was about to buy a ticket on Northwest, they offered me travel insurance for a very small amount. I think it was $12.50. It seems a lot cheaper than what I could find on Travel Guard or other travel insurance sites. I'm most worried about the airline going out of business and leaving me in the lurch. Does Northwest's insurance protect me if Northwest goes under? What about the other major insurers? Do they offer protection in the case the airline ceases operation?

    A: Travel insurance bought from an airline will, in most cases that we know of, not protect you should that airline go out of business. Read the fine print in the policy of any airline-sold travel insurance and you'll see this exclusion. This is true even if the insurance company underwriting the policy offers such protection in the policies it sells directly. Travel Guard, for instance, writes insurance for some airlines, and will offer protection against airline default if you buy the policy directly from Travel Guard, but not if you buy a Travel Guard-underwritten policy from an airline.

    Don't forget that your credit card offers some protection as well, but only if you contest the charge, from your out-of-business airline within 60 days of seeing it on your statement.