Travel Insurance Doesn’t Always Cover Disruptions from Volcanic Eruptions

With Mount Agung simmering on the east end of Indonesia’s Bali paradise, travel agents booking clients to any destination with volcanic activity should refresh their knowledge of how a volcano impacts travel plans and the insurance they advise their clients to take.

This year, many destinations have witnessed more volcanic activity, including Sicily and Costa Rica.

In the case of Bali, the Denpasar airport was closed for two full days this week due to the ash and smoke that jeopardized the safety of aircraft flying in the region. As a result, more than 1,000 flights have been canceled and tens of thousands of tourists trying to head home were stranded, needing overnight accommodations and facing other expenses. Similarly, passengers heading to Bali for vacation had their trips shortened or canceled outright due to the lack of inbound air service.

On social media, many travelers from outside the U.S. stranded on the island were complaining that their travel insurance companies would not pay for any of their expenses because unbeknownst to them, the insurance companies had declared Mount Agung’s activity a “known event” in September, when the volcano first started rumbling.

Other insurance companies made the cutoff date this Saturday, when Mount Agung began erupting after a relatively quiet period. In a tweet to Travel Market Report, BHTP said that it would pay for claims for insurance coverage “purchased prior to 11.25.2017.”

“Volcanoes are one of the hardest things for travel insurance companies to deal with,” said Daniel Durazo, director, communications, USA, for Allianz Global Assistance. Allianz declared the volcano a known event on Nov. 27, and according to Durazo, his company has received “a handful” of calls from clients, and that “one or two claims” had been filed for reimbursement.

As Durazo explained, volcanoes can spew ash and smoke for “days, weeks or months. When does that cross the line to an imminent eruption” and trigger an insurance company to declare “a known event?” he said.

When Eyjafjallajökull, a volcano in southern Iceland, suddenly erupted in April 2010, hundreds of thousands of flights were canceled and millions of airline passengers were stranded for about eight days as smoke and ash blanketed Europe and the North Atlantic, making airline travel perilous.

“Most of the claims travelers made in 2010 were for travel delays, paying for additional food, transportation and lodging,” Durazo said.

Durazo recommends that travelers and travel agents call ahead to their insurer if they are traveling to a destination where there has been known volcanic activity, to understand if a “known event” has been declared. They also should determine what their policy covers, as different plans have different limits

For example, on Allianz’s most popular coverage, its “Classic” plan, the policy limit for travel delays is $800, with a daily limit of $200. The coverage pays for “additional accommodation/travel expenses and lost prepaid expenses due to a covered departure delay of six or more hours.” On its “Basic” plan, Allianz will only pay out a maximum of $300, with the daily limit being $150.

Another gray area is for travelers in the middle of their Bali vacation, but looking to leave because they fear for their safety. Currently, in Bali the government is only evacuating people in a zone about six miles from Mount Agung.

If a traveler vacationing in one of the popular resort communities 30-40 miles away from Mount Agung sought to be evacuated by their airline and make a claim to their insurance company, they very likely would not be reimbursed for any non-refundable elements of their shortened trip.

“Travel insurance doesn’t typically evacuate for non-medical reasons,” Durazo said.