Trip insurance is an excellent way to help protect your travel investments in the event of certain covered travel hiccups. This can include instances such as trip cancellation, trip interruption, missed flight connections, and more.
When you buy travel insurance, the single most important number is the portion of your trip that's both prepaid and nonrefundable. That figure determines how much protection you will need, how much your policy will cost, and what you'll get back if you must cancel or interrupt your trip for a covered reason.
What Is Considered a Prepaid Nonrefundable Cost?
A prepaid, nonrefundable cost is any part of your trip you paid for in advance that you won't get back if you have to cancel. For example, an airline ticket that's nonrefundable or a hotel deposit that will be forfeited if you cancel. These are the amounts travel insurance is designed to cover.
Why Travel Insurance Only Covers Prepaid, Nonrefundable Costs
Insurance exists to protect against actual financial loss. If you can recover money from your airline, hotel, or tour operator, for example, there is nothing for the insurer to reimburse.
Therefore, only the prepaid, nonrefundable portion that you genuinely stand to lose should be included when calculating your insurable trip cost. Any amount you can credibly recover from the supplier, such as cash refunds, credits convertible to cash, or refunds of taxes and fees, does not count as a nonrefundable loss at the time of a claim.
Getting this number right is important, as the cost of your trip insurance policy is directly affected by the expenses the policy will need to cover.
If you input the full trip cost instead of just the non-refundable portion, your insurance won't be able to correct you. Be mindful of the amount you enter to avoid overpaying for your travel insurance.
How To Determine Your Nonrefundable Costs
To figure out your total nonrefundable trip costs, you should first take note of all of the transactions you’ve made to book your travel plans.
This can include the following expenses:
- Flight costs
- Prearranged transportation
- Hotel or stay accommodations
- Event tickets
- Tours
- Cruise costs
After you have made a list of your prepaid travel expenses, you must read the policies of your bookings to see which deposits or payments are completely nonrefundable in the event that you need to cancel or change travel plans, and these are the expenses that you will insure.
If a prepaid cost is refundable, such as a refundable hotel stay, you will not include this in your trip cost calculation for your insurance.
However, if a refundable expense charges a cancellation or penalty fee, you can include this fee in your cost calculation.
Unexpected Costs That Also Count
Travel insurance doesn't just cover obvious prepaid items like flights or hotel deposits. Many travelers are surprised to learn that certain unexpected losses also fall under the umbrella of prepaid, nonrefundable costs. If your luggage is lost, your passport is stolen, or you face expenses from trip interruptions, those costs can also be reimbursable.
Similarly, medical emergencies abroad, whether it's treatment bills, emergency medical transportation back home, or cancellation penalties triggered by a sudden illness, are covered because they represent real, nonrecoverable financial losses beyond your control.
The good news? You don't need to include these costs in your trip cost estimate. These costs are not ones you can reasonably predict or anticipate so insurance companies don't expect you to include them, but you still get the coverage for them!
How to Calculate Trip Cost for Travel Insurance
Here is an example of how to calculate your nonrefundable trip costs.
Let's say you are planning a trip to France. Your expenses are:
- Flight - $2,000 nonrefundable
- Hotel - $1,500 total @ $250/night, refundable except for 1 night’s stay if canceled
- Tour - $250 nonrefundable
- Airport transportation - $50 refundable
The total for all prepaid expenses is $3,800. Your total insurable trip cost, however, is $2,500. This is because $1250 of your hotel expenses are refundable except for 1 night’s stay ($250) and airport transportation is also refundable.
What Isn't Considered a Prepaid Nonrefundable Cost?
The following expenses are not typically considered prepaid nonrefundable costs and should not be included in your trip cost calculations:
- Accommodation expenses that you pay after you arrive to your destination
- Meal costs during your trip
- Excursions or events that are arranged after you arrive to your destination
- Cost of gifts or souvenirs purchased during your travels
When calculating your trip costs to insure through a trip insurance plan, remember to only calculate those expenses which are prepaid and nonrefundable to ensure that you are properly protected during your travels.
Important Caveats and Common Pitfalls
When figuring out what counts as a prepaid, nonrefundable cost, a few situations often trip people up. Here are the most important ones to keep in mind:
Some plans require you to report all your prepaid, nonrefundable expenses
Some benefits like Cancel For Any Reason (CFAR) or pre-existing condition waivers require insuring 100% of your prepaid nonrefundable costs. So if you would like to opt for those benefits make sure to report the exact nonrefundable amount, or round up if you don't have the exact number on handbut never round down.
Vouchers and credits aren't always cash
If an airline, cruise line, or tour operator gives you a voucher or future-travel credit instead of a cash refund, that amount may not be insurable unless your policy explicitly says so. Always check the fine print, save the documentation showing the voucher's value and restrictions, and don't assume a credit works the same as a refund.
Cruise credits are a gray area
Cruise lines often issue future cruise credits or onboard credits instead of refunds. Whether these are covered depends entirely on the policy wording. If it isn't clear, don't hesitate to ask before you buy.
Frequent flyer miles and points
You can't insure the retail value of award tickets because you didn't pay cash. What you can include are the actual cash costs you paid, such as: taxes, fees, or re-banking charges for miles. Keep detailed proof of these amounts.
Refundable bookings with penalties
A refundable hotel stay or flight isn't fully insurable. However, if the supplier charges a cancellation fee or partial forfeiture, that penalty amount is considered nonrefundable and can be included in your trip cost. For example, if a hotel keeps a $100 deposit when you cancel, you can insure that $100, not the entire room total.
What to Save and How Insurers Evaluate Claims
Insurers evaluate claims against documentation. Keep these items in an easily accessible place:
- Booking confirmations showing amounts paid and dates.
- Payment receipts and credit card statements.
- Supplier cancellation policies or email confirmations of credit/voucher issuance.
- Any refund notices, voucher or credit statements (with value and expiration).
- Proof of cancellation reason when applicable (medical notes, airline cancellation notices, jury duty summons, etc.).
When a claim is filed, insurers first verify that your claim is for a nonrefundable cost, matches your supplier's paperwork, and fits within your coverage limits. If the supplier refunded a portion, the insurer will expect proof. That's why saving every receipt and email matters.
How VisitorsCoverage Can Help
If you want help comparing plans and confirming whether a policy's wording fits your unique booking (for example, cruise credits, award tickets, or CFAR needs), VisitorsCoverage's comparison tools and team of licensed agents are at the ready to be there when you need help.
Frequently Asked Questions
Are flights purchased with frequent flyer miles considered refundable?
If I paid for my trip with rewards points, can I insure their value?
The points or miles themselves aren't typically insurable, but any redeposit fees or taxes paid in cash can be included in your insured trip cost. Some specialized travel insurance plans do offer point/mile reimbursement features, so check policy details if this is important to you.
A cruise will give me a cruise credit instead of a cash refund, is that insurable?
It depends on the policy. Some insurers allow claims based on supplier-issued vouchers or future travel credits if the policy specifically permits it; others only cover cash losses. Keep the cruise line's written communication showing the credit's value and expiration and check the plan wording before purchasing.
How precise should my trip cost calculation be?
Always be exact. Rounding down can make you ineligible for certain benefits. If anything, round up to the nearest dollar, but it's best to match your receipts exactly.
What if I'm not sure if something is refundable or not?
If you're unsure about the refund policy for any prepaid expense, contact the provider directly to clarify their cancellation terms before purchasing insurance. Get their policy in writing if possible. When in doubt, you can also consult with a licensed travel insurance agent who can help you determine what to include.
Can you change your insured trip cost after purchasing?
Typically, you can add additional insured nonrefundable expenses to your trip insurance typically within a certain window of purchasing your plan and before your travel dates. Adding additional expenses will increase your premium. You may also be able to decrease your insured amount if something changes in your travel plans before your departure within the insurance provider's policy window.
Do I need to show evidence of my trip deposits or payments?
While you may not need to show evidence of payments or deposits when you purchase your trip insurance plan, you will likely be asked to provide payment proof if you file a claim so it's important to keep records of this information.
Can I include costs that aren't prepaid but will be charged in the event of cancellation?
Yes, you can include costs that aren't prepaid but will be charged in the event of a trip interruption, such as a hotel deposit for one night that will be charged if you miss your reservation.
What happens if I accidentally insure more than my true nonrefundable costs?
Youll likely pay a higher premium than necessary, but at claim time the insurer will only reimburse up to your documented nonrefundable loss. Declaring too high a trip cost doesn't increase your payout. However, many insurers will allow you to adjust your coverage if you do so within a certain time window. Just make sure to contact your insurance provider as soon as possible.
If one of my trip expenses is $1,293, is it okay to round down to $1,290 when calculating my trip cost?
When calculating your trip cost, you never want to round down. Rounding down can lead to losing eligibility of certain benefits, such as pre-existing condition exclusion waiver or cancel for any reason, if these are benefits you are interested in.
