Trip Insurance: What Is Considered a Prepaid Nonrefundable Cost?

Trip Insurance: What Is Considered a Prepaid Nonrefundable Cost?

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.

Purchasing a plan requires you to insure the total of your trip’s prepaid and nonrefundable expenses. When calculating your trip cost for your trip insurance policy, it’s important to understand that you should only include expenses associated with your trip that are prepaid and nonrefundable.

What Is Considered a Prepaid Nonrefundable Cost?

Nonrefundable, prepared trip costs that are paid before you depart on your travels are those which are directly associated with the trip you are insuring that would not be able to be recovered if you cancel the trip or it is interrupted for covered reasons.

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.

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. Learn more about trip insurance and its benefits for travelers.

Frequently Asked Questions


Are flights purchased with frequent flyer miles considered refundable?

Frequent flyer miles are considered to be refundable and should not be included as part of your insurable trip cost. However, if there are any fees associated with re-banking your frequent flyer miles in the event of you canceling or changing your flight, you may be able to insure this fee amount.


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.


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.