Victoria Zidwick a RoamRight Blog Author

How Travel Insurance Works When an Airline Goes Bankrupt

When you plan your trip, you don’t plan on your travel supplier going bankrupt. You expect them to be able to fulfill the services you bought from them. However, it is unfortunate that some businesses do close up shop, leaving travelers stranded and possibly without recourse. With a good travel insurance policy, though, travelers don’t have to lose out just because their supplier experiences financial difficulties.

Bankrupt Airline Strands Passengers   

Icelandic airlines Wow Air abruptly ceased operations on March 28, 2019. All flights were cancelled, leaving passengers stranded – some in their destinations and some at home, waiting to leave on their trips. Wow Air’s website advised travelers to “check available flights with other airlines.” It goes on to suggest travelers contact their credit card companies, travel agents, and travel insurance providers to seek compensation. The airlines did not offer to refund travelers’ money, instead saying that they may be entitled to compensation if they file a claim with the administrator/liquidator of the bankruptcy.1

In short, it would likely take a while for travelers to get their money back. In the meantime, most travelers just wanted to get home.

What type of travel insurance may cover a bankrupt airline?

If you have not yet departed on your trip, you may be able to file a travel insurance claim under trip cancellation coverage. If you are on your trip and need to get home, you’ll have the same type of coverage under the trip interruption benefit.

Under Arch RoamRight plans, benefits will be paid due to Bankruptcy or Default of an airline only if no alternate transportation is available. If alternate transportation is available, benefits will be limited to the change fee charged to allow the traveler to transfer to another airline in order to get to their intended destination.

It is also important for you to buy your travel insurance early so that you have coverage for if your common carrier goes bankrupt and experiences a complete cessation of services. Under Arch RoamRight plans, you must purchase your insurance within 21 days of your initial trip deposit, and the bankruptcy and cessation of service must occur more than 14 days from the date you purchase your plan.

Are other travel costs affected by a bankrupt airline covered?

If your airline ceases operations due to financial default, and other aspects of your trip are impacted, you may also have coverage under the Delayed Arrival benefit. For example, if a passenger was taking Wow Air to Iceland, and then boarding a ship to cruise around Iceland, they likely would have missed their ship’s departure. In this case, they may be eligible to receive reimbursement for non-refundable, pre-paid costs associated with the cruise, as well as additional travel costs incurred to get them to the next port-of-call to board the ship.

Travelers who are stranded in a destination, trying to get home, may have coverage for extra hotel nights and meals incurred until they can travel home on another airline.

I’m employed by an airline that ceased operations. Do I have coverage?

Airline employees may have trip cancellation coverage under Cancel for Work Reasons. If you purchase your travel insurance within 21 days of your initial trip deposit, Cancel for Work Reasons is automatically included in the RoamRight Elite and Pro Plus plans, or it can be purchased as an upgrade with the Preferred plan.

Cancel for Work Reasons coverage protects in the following scenarios:

  • A transfer of you or your traveling companion by the employer by whom you or your traveling companion are employed on your effective date which requires your principal residence to be relocated.
  • You are (or your traveling companion is) required to work during the scheduled trip. You or your traveling companion must demonstrate proof of requirement to work, such as a notarized statement signed by an officer of your or your traveling companion’s employer.
  • Your (or your traveling companion’s) company is directly involved in a merger or acquisition. You or your traveling companion must be an active employee of the company that is subject to a merger or acquisition, and you or your traveling companion must be directly impacted by such an event.
  • Your (or your traveling companion’s) company operations are interrupted by fire, flood, burglary, vandalism, product recall, bankruptcy or financial default.

How do travel insurance companies define bankruptcy?

Arch RoamRight defines bankruptcy or financial default as “the total cessation of operations due to financial insolvency, with or without the filing of a bankruptcy.”

What are the limitations on travel insurance for bankrupt airlines?

Coverage may vary by policy, provider and your state of residence. Most Arch RoamRight travel insurance plans offer trip cancellation coverage due to bankruptcy or default of services, provided that:

  • The travel insurance policy is purchased within 21 days of making the initial trip deposit; and
  • The Bankruptcy or Default causes a complete cessation of travel services; and
  • The Bankruptcy or Default occurs more than 14 days following the Effective Date of your travel insurance.

For a list of all travel insurance exclusions and limitations, please read your policy.



1(2019, March 28). End of Operation of WOW AIR. Retrieved April 04, 2019, from http://wowair-web-files.s3.amazonaws.com/Information to passengers 28032019.pdf

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About the Author

Victoria Zidwick

Victoria Zidwick, a RoamRight Blog Author RoamRight's Marketing Communications Specialist, Victoria Zidwick, has worked in the travel insurance industry for more than five years. She has traveled extensively throughout the United States and has a handful of international travel experiences.Victoria's travel experiences have changed in recent years, as her family grows and she is learning the ins and outs of traveling with children. Connect with Victoria on LinkedIn or follow her onTwitter or Google Plus.

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