Why Small Business Owner Clients May Have Travel Insurance Risks

Most travel agents are well aware that any events damaging or destroying their client’s home, causing them to cancel an insured trip, could trigger reimbursement for their client.

But if a client is a small business owner, and the event destroys or causes damage to their client’s business, their travel insurance provider might not reimburse them for coverage on their vacation.

There are more than 5.6 million employer firms in the U.S., according to the Census Bureau’s Annual Survey of Entrepreneurs. Nearly 100 percent of those firms have fewer than 500 employees, and 89 percent have fewer than 20. There also are approximately 25 million firms that employ only the owner, so most travel agents probably have small business owner clients.

The issue of ensuring these clients are insured appropriately came to light recently, when, in Narragansett, Rhode Island, a fire destroyed the family-owned auto body shop of Caroline and Vinnie Flynn, just days before they were scheduled to leave for a Bahamas cruise.

Reeling from the devastation, the Flynns initially focused on assessing the damage to their business, and filing an insurance claim for their losses. They had purchased travel insurance from Allianz for the $4,000 cruise, so they assumed they would file a claim for that, too, and simply reschedule their trip for a later date.

“We submitted our claim and they bounced it back and said it is not one of the canned or boilerplate reasons for us to cancel a cruise,” Vinnie Flynn told a local television station. “We thought that was pretty unfair.”

“You’re thinking I’m buying this and if something catastrophic happens, I’m covered,” Vinnie said. “Something did catastrophically happen, and I’m not covered.”

At the time, Allianz spokesperson Daniel Durazo told the television station that fire at a business was not in their list of covered events.

In an initial response to the television station, Durazo wrote: “Travel insurance covers the situations that most frequently cause consumers to cancel their trip, but it doesn’t cover every situation. The situations that most often cause consumers to cancel their trip and are covered by travel insurance include illnesses and injuries to the insured and their families and traveling companions; legal and military obligations; a home or destination becoming uninhabitable due to natural disaster, flood, fire, burglary or vandalism; services canceled by a travel supplier; terrorism at a destination; and a work termination or layoff, among other reasons. A fire at a business would not be a situation covered by travel insurance.”

Subsequently, Allianz received medical documentation “stating that the customer suffered a medical issue after the fire and we were able to cover their claim,” Durazo told Travel Market Report.

Durazo said that he could not recall an issue like this in the past. “Travel insurance doesn’t cover everything and it’s important that consumers read their policy to understand the common situations that it does cover. Consumers also have the ability to cancel their policy after they’ve reviewed it and receive a full refund if they feel that it doesn’t meet their needs,” he said.

Some insurers offer some policies covering small businesses
InsureMyTrip Anytime advocate Gail Mangiante said, “Some policies include unforeseen circumstances, related to employment, as covered events,” but she recommends travelers contact a licensed travel insurance agent for help finding a policy that best suits their needs.

Mangiante recommends self-employed travelers consider purchasing “Cancel For Any Reason” (CFAR) insurance, which allows travelers to cancel a trip for any reason, up to 48 hours prior to the scheduled departure. Reimbursement is usually 50-75 percent of the prepaid, non-refundable trip cost. A traveler must meet specific eligibility requirements and must purchase a policy with CFAR selected within 14-21 days of making an initial trip payment or deposit.

The website, TravelInsuranceReview.net, lists Travel Safe, Travel Insured, and AIG Travel Guard, among many companies, as offering coverage in the event of business property damage — under certain conditions.

Under a heading about property damage, TravelInsuranceReview states that, “For cancellations due to your business being deemed unsuitable for business due to a vandalism, fire or burglary, the insured or their traveling companion must be directly involved as a key employee required to operate the business or as part of the disaster recovery team.”

Travel Market Report emailed TravelInsuranceReview about their listings and their advice, but did not receive a reply by press time.

Meanwhile, the Rhode Island State Senate and House are both moving travel insurance bills through their respective committees, principally seeking to codify the sale and licensing of travel insurance entities. There is no indication that either bill is addressing the issue of covered events for small businesses.