For months, you’ve been looking forward to your planned tour of Thailand. But when you arrive in Bangkok, no one’s holding a sign with your name on it; in fact, there’s no sign of your tour company at all. A few calls later, you discover the truth: It went out of business. Now what?

Travel company bankruptcies are more common than you might expect. Several European airlines have been grounded by financial storms in recent years, including Air Berlin, Slovenian company Adria Airways and popular budget carrier WOW Air. The bankruptcy of Thomas Cook, the world’s oldest travel company, left 600,000 travelers stranded around the world.¹

So what should you do if this happens to you? And can you get your money back if your airline or tour company goes out of business? Yes — if you have travel insurance (and the company is a covered supplier). We’ll look at two common travel scenarios.

Don’t have travel insurance yet? Get a quote for an easy-to-afford plan.

#1: Your Travel Supplier Shuts Down Before You Leave

You score a cheap fare to Prague through a budget airline. Then, two days before you’re supposed to depart, the airline announces it’s ceasing operations. You call immediately, but are put on hold for two hours. Your Airbnb is already booked, and it’s too late to cancel now — but the price of a new flight is close to $700. What should you do?

First things first: You shouldn’t expect to get your money back from the airline. “If the airline shuts down with no notice, the prospect of getting a refund directly from them may be problematic,” aviation lawyer Mark Dombroff advises.² Fortunately, travel insurance with trip cancellation benefits can help.

The financial default of a travel supplier can be a covered reason for trip cancellation. This means your tour operator, airline, or cruise line ceases all operations due to its financial condition, whether or not it files for bankruptcy. However, in order for your losses to be covered, a few conditions apply:

1. Your policy must have been purchased within 14 days of the date of the first trip payment or deposit;
2. The cessation of operations must occur more than seven days after your policy’s coverage effective date;
3. Your policy was not purchased directly through the tour operator, airline, or cruise line ceasing operations, or an affiliate of that entity; and
4. The tour operator, airline, or cruise line was included in our list of covered suppliers on your policy’s coverage effective date.

In the Prague scenario, you have two options: You could cancel the entire trip, and get reimbursed for the airline ticket, your Airbnb stay, and any other unused, non-refundable, prepaid expenses. Or, you could book a new flight, take the trip, and file a claim just for the unused ticket from the defunct airline (provided the airline was a covered supplier). 

What if you don’t have travel insurance? If you purchased your airfare with a credit card, the federal Fair Credit Billing Act says you’re entitled to a refund if your flight is canceled, according to travel industry lawyer Jeffrey Miller. Debit cards don’t give you the same protection, however, and your hotel/Airbnb stay isn’t eligible for a refund.³

#2: Your Travel Supplier Shuts Down While You’re on Your Trip

As an anniversary gift, you purchased a pricey food and wine tour of Sicily for you and your spouse. The first three days are delightful — but then, your driver fails to show up at your Syracuse hotel in the morning. When you finally get someone on the phone at the tour company, you learn that it has gone bankrupt. You’re stranded in Sicily. What now?

Don’t expect the U.S. Embassy to come to the rescue. In Britain and the European Union, consumer laws offer some financial protection to travelers in this situation; but these laws don’t protect American tourists.⁴ Luckily, travel insurance can save the day! Your trip interruption benefits can:

• Reimburse you for the unused, non-refundable portion of your trip. (The same conditions for supplier financial default apply.)*
• Reimburse you for reasonable transportation expenses you incur to continue your trip or return home.*
• Reimburse you for additional accommodation and transportation expenses if the interruption causes you to stay at your destination longer than you’d planned.*

*Please note that that your plan limits apply – be sure to check your plan documents to see how you may be covered.

So in the Sicily scenario, your travel insurance could potentially pay for an extra hotel night in Syracuse, while you make new travel arrangements; your car transportation back to the airport; and the cost of new tickets home. It also can reimburse you for the part of the tour you paid for and never got to use. You also can call 24-Hour Hotline Assistance for help figuring out new travel plans.

What if you don’t have travel insurance yet? Find affordable protection for your next trip.

Related Articles

• Insurance to Cover Your Cancelled Flight
• Unpacking Surprises: Common But Unexpected Reasons for Trip Cancellation
• How to Understand Your Travel Insurance Plan Details