Can you get a refund with travel insurance? Kiwi stuck with unusable $900 policy

A view of Ben Gurion Airport in Tel Aviv earlier this year before the confilict in Gaza. Photo / Getty Images

Recent experience has taught travellers that there are certain circumstances that render travel insurance void. Wars and pandemics are among these small print exclusions but, if you no longer intend to travel or have no use for your policy, can you get a refund on unused travel insurance?

Eli Merimo, 59, from Auckland was due to travel to Tel Aviv this summer, departing on December 20 with Air New Zealand and Cathay Pacific.

Having booked travel in September, he took out a comprehensive travel policy covering 20 days in Israel and a layover in the US for $856. This substantial premium to cover travel via America was about a third of the cost of his airfare. A month later war erupted between Israel and Hamas, leading to Merimo’s airline cancelling his flights.

As it was now too late and too expensive to make alternative plans after this costly cancellation, Merimo says he will spend the holidays at home in Auckland. Unable to travel or claim on insurance due to war, he wanted to know if the almost $900 premium was forfeit.

“We were saving cent to cent to pay for this travel,” he says. “We can’t claim any losses and we can’t even keep this huge amount of $856 as a credit for our future travel.”

Despite the cancellation on October 23, which was to their Cathay flight from Hong Kong, the airlines had been very flexible. He received a full refund on the flights, some of the accommodation and even car hire for the trip - but the insurance itself was one of the largest expenses left outstanding.

“We actually don’t have [much] to claim because the airlines we purchased the tickets from gave us a full refund without any penalties,” said Merimo.

However, his insurer Tower said that because he had passed the 14-day “cool-down” period he could no longer cancel his policy, even if he had not yet travelled. Nor could he claim any expenses, due the policy’s General Exclusions for war.

The policy’s Allianz Partners had changed their terms on October 10, in response to the Ministry of Foreign Affairs and Trade’s change in travel advisory to Israel.

The underwriter backdated the policy suspension to October 7, saying its general exclusions included all “warlike operations (whether war is declared or not)”.

The traveller was therefore left without any travel plans and a $900 unusable insurance policy, unable to make any claims.

“It’s a real catch 22,” said Merimo.

Despite this his son’s partner, who had been intending to travel with Merimo on the same cancelled flight, was able to go to her insurance provider Southern Cross and was offered a refund on her policy for credit. Merimo wanted to know why he could not get at least a partial refund for his unused premium, if other insurers were refunding customers flying to Israel.

Air travel to Tel Aviv, Israel was affected by some airlines' decision to suspend flights after the October 7 attacks. Photo / AP

What is a cool-down period for insurance?

Many insurers will include a cool down period on travel policies. It lasts between 14 and 21 days and during this period a policy holder can return to their insurer and ask for a full refund.

Some travel companies take this cooling-down period as a cutoff, after which the holder is locked in to a policy. However, this “cooling-down” period is actually nothing to do with insurance.

It’s part of New Zealand’s Consumer Guarantees Act. In the case of insurance it’s the time considered fair for those buying insurance to fully understand the fine print or reconsider their travel. It’s a protection for the traveller’s consumer rights, not the terms of their insurance.

That said, the insurance is still valid during this cool down period.

The insurer and their underwriters are “on risk” from the moment a policy is agreed. Even if the traveller does not make any claims during that period the policy is considered to be active and providing cover.

Whether insurers choose to refund any or all of a traveller’s premium if they wish to cancel a policy early, any refunds are on a case-by-case basis and depend on the insurer.

Tower chief underwriting officer Ron Mudaliar told the Herald more than 30 per cent of travel claims occur before departure, so they are providing a service from the moment insurance is purchased.

“It’s important to take out a travel insurance policy as soon as you book your trip,” says Mudaliar.

This incident was further complication that the policy holder’s travel was affected by a war in his intended destination.

“Policy exclusions for war are common across the industry and unfortunately, in this situation, the war exclusion does apply,” he said.

While the cool-down period had passed and Tower do not normally offer any refund on travel policies past this point, Mudaliar said they were willing to make an exception in this instance.

“We will always consider circumstances on a case-by-case basis and as a goodwill gesture, we are happy to refund the premium fully.”

When can you get an refund on travel insurance?

Unused travel insurance is a difficult thing to quantify use of or calculate appropriate refunds for policies. If a traveller holds a policy, the insurer is considered to be “on risk” for the term of the contract and providing a service. This is the case even if the customer never makes a claim or travels.

While many insurers will tie the ability to ask for a refund to a cooling-off period, Insurance Council chief executive Tim Grafton says it is more about the consumer rights of the traveller.

“A cooling-off period provides the opportunity for the customer to ensure they have read all the terms and conditions, made sure the policy meets their needs and they are comfortable to retain the policy.”

The customer has cover from the purchase date, or date specified, for the policy and has received value from their policy.

“There is no blanket response for how an insurer will treat refunds, some companies provide partial or full refunds and others will look at the individual situation on its merits.”

Just within New Zealand there is a wide range of insurers whose responses vary if a traveller wishes to end a policy early. For example, insurer Southern Cross allows travellers to apply to cancel unwanted policies online for future credit, however if you have passed the 14-day cool down period a $35 admin fee applies.