2025 Supplier Failure Travel Insurance: What It Covers & How to Claim

2025 Supplier Failure Travel Insurance: Coverage & Claiming Guidelines

What is supplier failure?

When a travel company—such as an airline, cruise line, or tour operator—goes out of business or shuts down operations for financial reasons, supplier failure results. With cancelled tours and out-of-pocket prepaid costs, this can leave tourists stuck. With 23 airlines declaring bankruptcy in 2019, the vulnerability of the aviation sector was emphasized in a 2019 report; this year marks the worst on record for such events The Independent. Affecting 600,000 travellers, the latest Thomas Cook bankruptcy shows the significant influence these events can have (Reuters).

What does supplier failure insurance cover?

Sometimes known as "financial default" coverage, supplier failure coverage is a travel insurance benefit covering non-refundable trip expenses should your travel agent file for bankruptcy or stop operations. This covers prepaid costs, including flights, lodging, tours, and other fees. Some insurance covers extra expenses such as last-minute flights home or substitute lodging if you are stranded mid-trip. For instance, you might get compensated for the cruise cost and any non-refundable hotels or flights you booked should your cruise company file for bankruptcy before your trip. Should your tour operator file for bankruptcy while you are on travel, the coverage could cover your journey home and any non-refundable tour missed.

Important eligibility requirements

For this coverage, the main criteria are as follows: Many policies mandate that you get the insurance shortly—usually ten to twenty-one days—after your first trip deposit. Generally, following the effective date of your insurance, there is a waiting period ranging from 7 to 14 days before the coverage starts. Most policies also require you to insure 100% of your non-refundable vacation expenses. One important point to remember is that should the travel agent be in bankruptcy or already having financial problems when you purchased your policy; you are usually not insured. For instance, a later bankruptcy might not be protected if you get insurance following a public disclosure of the financial problems of a corporation.

Types of Supplier Failure Coverage

This coverage comes mainly in two flavours: "End Supplier Failure" and "Scheduled Airline Failure Insurance (SAFI)." Covering the financial default of several travel providers, including airlines, hotels, and vehicle rental agencies, End Supplier Failure provides more general protection. More narrowly, SAFI only addresses airline bankruptcies. Most importantly, not all travel insurance policies offer these coverages as default. To identify plans that mainly provide this protection, closely review the policy text or use comparison websites with criteria like "Financial Default" on Squaremouth.

How to claim supplier failure insurance

If your travel agent files for bankruptcy, get in touch personally to investigate refund choices or substitute vacation plans. Record all contacts. To make a claim, then get in touch with your travel insurer. You will require records, including your trip schedule, prepaid expense receipts, and evidence of supplier bankruptcy. Before your insurer pays out on the claim, you will likely be requested to try to recover your charges via other sources, including your credit card company or travel agent. This is consistent with a basic insurance principle: you should claim through all other possible outlets before using your policy. Major companies like Visa and Mastercard have credit card chargebacks, which can be a valuable tool in these circumstances (as advised on CHOICE).

Other forms of protection

Travel expenditures with a credit card offer more safety. If you purchase with a credit card, under the Fair Credit Billing Act, you can contest charges for services not received (Federal Trade Commission). Some travel agencies and tour companies also provide their financial protection schemes. For travellers in the UK, for instance, ATOL protection offers refunds and repatriation should their travel business fail (Civil Aviation Authority). Since the agent may be in charge of refunds or rebooking should one provider in the package fail, package holidays booked through a travel agent typically have more built-in protection than trips bought piecemeal. Finally, always find out from your travel agent about their refund policy and cancellements resulting from supplier problems. Some might provide vouchers or different travel plans.