Trip cancellation insurance is designed to reimburse you for financial losses incurred when you're forced to cancel a trip or interrupt it. You will not be reimbursed if you simply change your mind about traveling or forfeit only a modest deposit or prepayment. But if you've put down a large prepayment on a major trip, tour or charter, then trip cancellation insurance makes sense.

Risks To Your Trip

Most trip cancellation insurance policies will reimburse you for:

• Illness, injury or death. Coverage protects you and one or more traveling companions for cancellation or interruption of your trip because of illness, injury or death of a close family member who remained at home. Possible exception: cancellation due to a pre-existing condition.

• Operator failure. If a travel agency, tour operator or airline collapses, trip cancellation insurance will reimburse you for the cost of worthless airline tickets or prepaid hotel vouchers. While most policies say they pay in case of "failure" or "default," a few say they protect only against "bankruptcy." That's an important distinction: An operator can fail without ever filing for bankruptcy. Many policies exclude failure of either the company that sold the travel service or the insurance; a few exclude both. This exclusion could mean you're without coverage, depending on from whom you bought the insurance or the travel.

• Home misfortunes. Covers you against a wide range of unavoidable and unexpected mishaps at home that might require you to cancel or interrupt a trip.

• Destination disasters. Coverage for a long list of unexpected problems at your destination (or in any area through which you plan to pass).

TCI Payoffs

In general, trip cancellation insurance payments are made in case of a problem:

• Cancellation. If you must cancel a trip before you leave, payments are limited to nonrefundable prepayments, deposits or additional costs. If you cancel a package tour, you must ask the tour operator for any refund it provides in case of illness. The insurance company pays the difference.

• Interruption. Again, payoffs supplement what you recover from your airline or tour operator. If something goes wrong during your trip, or if you postpone rather than cancel your departure, trip cancellation insurance policies pay the extra costs of alternative transportation to rejoin your trip. The insurer also pays for an unscheduled return.

The Cost of Your Policy

Prices vary depending upon how comprehensive the policy is. For basic coverage, expect to pay between $5 and $7 for every $100 worth of protection.

Travel Insurance You May Already Have

• American Express automatically gives card members $100,000 worth of travel-accident insurance whenever they charge an airline, train, bus or cruise-ship ticket to the card. Visa Gold cardholders automatically receive $150,000 worth of coverage. Other coverage offered with certain credit cards includes a lost-baggage plan, trip-delay protection, replacement of lost or stolen items that were purchased with the card, and roadside assistance.

• Buried in the fine print of most standard homeowner's policies are several types of valuable travel coverage. In fact, whatever is scheduled for coverage at home is also protected when you take it on the road. For example, if your hotel room is burglarized, most policies will treat your losses as if the theft had occurred at home.

Some information courtesy of the Filipino Pavilion and Travel Emporium web site, www.websciences.org/dvhpub/tci.htm.