Trip-cancellation insurance is one of those financial products that makes some sense but seems totally skippable. And then came coronavirus, which is causing people to cancel trips to affected areas like Italy.
Trip cancellation is a lot like travel emergency medical insurance. It sounds great in theory, but making claims is tricky because of exclusions and rules in the fine print. For some help on deciphering trip-cancellation insurance, check out a recent post by budget travel blogger Barry Choi.
Mr. Choi points out that there’s a type of travel-interruption insurance called cancel for any reason, or CFAR, but it’s expensive and typically covers only 75 per cent of the cost of a cancelled trip. The regular type of trip-interruption coverage applies for circumstances such as unexpected injury or illness, natural disaster, job loss, cancelled flight or a government travel advisory.
But even in these cases, you can’t assume you’re covered. CBC reports that two companies offering travel-interruption insurance no longer cover new customers who cancel trips in response to the outbreak of coronavirus. CBC says people with regular trip-cancellation insurance have generally been able to get reimbursed if, after booking travel, the federal government issued a coronavirus-related advisory government to avoid non-essential travel to their destination.
Mr. Choi says he considers travel insurance, including trip interruption, to be a must when traveling. If you’re travelling in the months ahead, just make sure that the trip cancellation policy you buy will cover you if your cancellation was related to coronavirus.
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Q: I recently read your newsletter on preparing for a recession, which I found extremely interesting and enlightening in today's hectic and volatile investment environment. I have shares in the iShares Diversified Monthly Income ETF (XTR), which provides me a pretty steady monthly income. Distributions are re-invested monthly. The recession article suggests having five years’ worth of cash flow needs at the beginning of retirement in bonds, bond funds and cash on hand. Would you consider these shares in XTR as qualifying for this category? I am two to three years away from full retirement.
A: No, XTR is not like holding cash. The price of XTR could fall in a stock market correction, and the monthly income payments could decline as well if one or more of the fund’s holdings cut their dividend payments. Consider XTR’s distributions as being reliable on the whole, but not as solid as holding cash.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
Tax tips for people who bought or sold a home in 2019 from the Canada Revenue Agency.
What I’ve been writing about
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- The 2020 ETF Buyer’s Guide: International and global equity funds (for Globe Unlimited subscribers)
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