Travel insurance coverage for financial default generally refers to the financially motivated cessation of operations of a travel supplier with whom you’ve booked all or part of your trip, and to whom you’ve already given payment for their services. Usually, airlines, cruise lines, and tour operators are the kind of suppliers whose financial default would be covered under your travel insurance policy. Financial default coverage reimburses you in full only if you are unable to make alternate arrangements to continue with your travel plans; if you’re able to book another flight, for example, your benefits would then be adjusted according to the specific terms of your policy.

The Definition of "Financial Default"

Financial default is not the same thing as bankruptcy. While some travel insurance plans may also provide coverage for bankruptcy, most offer only financial default benefits. The difference is that, in the case of bankruptcy, the company has entered into a legal process with the goal of resolving its financial difficulties and it may not stop providing services. In financial default, the company ceases to provide any services and stops all operations with no hope of repairing the financial damage. Be sure you’re familiar with the language used in your travel insurance policy so you know which situations are covered.


Financial default coverage is a time-sensitive benefit, meaning that you have to have purchased your travel insurance policy within a specified period of time after making your initial trip payment in order to get the coverage. This time period varies by plan and provider, but is typically around 10-14 days. In addition, you may be subject to a waiting period after your policy goes into effect; if that’s the case, then you would not be eligible for financial default benefits until after the waiting period had ended (check the terms of your policy to see if there is a waiting period, and if so, how long it lasts). Finally, to be covered for the financial default of one of your travel suppliers, that company would have to be listed as an approved supplier by your travel insurance company at the time you purchase your insurance. You can obtain the complete list from your provider if you have any questions about your travel supplier’s eligibility.

Third-Party Travel Insurance

Travel insurance is available in many forms, including as a special policy offered to travelers by the cruise lines or booking agencies with whom they’re doing business. However, while these add-on policies appear to be the simplest way to get travel insurance, they usually don’t include all the comprehensive coverage you’d get if you purchased your travel insurance from a third party. Financial default coverage in particular is one item that is frequently not covered by insurance policies you may purchase from a travel supplier.