Some travel insurance companies limit coverage for Crystal Cruises in wake of financial warning

Cruisers who book a trip with Crystal Cruises in the coming months may have trouble getting travel insurance that would cover a collapse of the line now that its parent company has stopped making payments to creditors.

Representatives from two leading travel insurance comparison sites tell The Points Guy that some travel insurance companies now view a shutdown of Crystal Cruises as a "foreseen event" that would not be covered by their travel insurance policies.

"We have heard back from some of the travel insurance companies that we work with, and they are considering this to be a foreseen event now that (the financial trouble) has been publicly announced," Meghan Walch, product manager for InsureMyTrip.com, told The Points Guy.

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Kasara Barto, a spokesperson for Squaremouth, said something similar.

"As Crystal Cruises' parent company has announced they are having financial difficulties, some travel insurance providers consider it to be a foreseen event and have excluded it from coverage," Barto told The Points Guy.

Crystal Cruises parent company Genting Hong Kong last week said it had stopped making payments to creditors as it contended with a sharp loss of revenue due to the coronavirus crisis. The company has begun negotiations with its creditors to restructure its debt, which stood at nearly $3.4 billion at the end of July.

Related: How to book a cruise with points and miles

Genting Hong Kong is the parent company of Crystal Cruises as well as two Asia-based cruise lines: Dream Cruises and Star Cruises. It also owns the Werften shipyard in Germany, where the first expedition ship for Crystal Cruises currently is under construction. In addition, it’s a joint venture partner in Resorts World Manila in the Philippines.

Many travel insurance policies include "financial default" coverage that will reimburse travelers for the amounts they pay for a trip if their travel supplier goes out of business. It's part of the "cancellation and trip interruption" coverage that is standard with travel insurance policies.

"This benefit is designed to reimburse a traveler’s prepaid and nonrefundable trip costs if they have to cancel their trip because of a complete suspension of operations by their travel supplier due to financial circumstances," Barto explains.

Related: A guide to travel insurance benefits for cruises

But the coverage only kicks in if the financial circumstances that led to the suspension of operations were unknown at the time the policy was bought.

"In order for the financial default benefit to apply, a policy must have been purchased before the business was impacted or financial issues became known, so coverage may be limited if a travel supplier has already declared financial hardship," Barto said.

A cruiser who booked a Crystal Cruises trip and purchased travel insurance before Genting Hong Kong's recent financial difficulties became known would still be covered.

Financial default coverage typically covers airlines, cruise lines and tour companies. It typically only reimburses in-full if a policyholder is unable to make alternate arrangements to continue with travel plans.

Barto said some travel insurance providers may still be providing coverage on new policies for the financial default of Genting Hong Kong-owned cruise lines.

"If travelers are specifically looking for coverage for Crystal Cruises, they should contact their travel insurance provider directly to confirm coverage is still available," she said.

Related: The coronavirus crisis claims its first U.S.-based cruise line

Barto also noted that financial default coverage typically only is valid if a travel insurance policy is bought within 10 to 21 days of the original trip booking. You can't wait until just before you travel to add such coverage.

The financial default benefit also is typically subject to a waiting period, often 10 to 14 days after policy purchase, before the coverage goes into effect.

Crystal Cruises has tried to assuage customer fears about its viability in recent days with a statement saying it isn’t on the brink of shutting down.

“It is important to understand that the company is not going out of business,” the Miami-based line said on Thursday in the statement. ‘Whatever option our parent company pursues, it will allow Crystal to operate its business.”

Additional resources for cruisers during the coronavirus outbreak:

• When will cruising resume? A line-by-line guide
• Why you shouldn't expect bargain-basement cruise deals anytime soon
• How to cancel or postpone a cruise due to coronavirus
• Some of the year's hottest new ships could be delayed
• Stream these 13 movies, television shows to get your cruise ship fix