When a family emergency or unexpected personal illness or a natural disaster causes a traveller to cancel at the last minute, they will lose the travel costs they have paid.
Most booking conditions provide that the traveller will not be entitled to receive a refund from their tour operator or travel or accommodation provider if they cancel 14 days or less prior to the departure date.
Only if the traveller has travel cancelation insurance, do they have a way to recover the travel costs.
In this article, we examine:
- Cancellation and Journey Disruption Insurance cover
- Case study of a tour cancellation by a traveller
- Cases where policy exclusions apply to exclude claims
Cancellation and Journey Disruption Insurance cover
The standard cover is:
Cancellation or disruption before Your Journey starts
We will pay You: The reasonable cost to re-arrange Your Journey or the non-refundable travel and accommodation costs you pre-paid in advance. This includes the travel agent’s fees or commission earned on the refundable portion of the cancelled Journey.
Disruption due to Injury or Sickness During Your Journey
If Your Journey is disrupted as a direct result of Injury or Sickness (including for COVID-19) You suffer, and a Registered Medical Practitioner certifies that You cannot travel until You have recovered, We will pay Your Extra accommodation (room only) and travel costs at the same fare class and accommodation standard originally booked.
Limiting our focus to cancellations before the journey starts, travel insurance provides cover only for specified events.
Some events where cancellation cover applies are:
- You are unfit to travel due to Injury or Sickness or due to Your death
- Sudden death, Injury or Sickness of a Travelling Companion, Relative or Business Partner who is located in Australia
- Due to severe weather or Natural Disaster that has either caused Your accommodation to be uninhabitable or has resulted in the closure of an airport
- Your travel arrangements have been cancelled, delayed or rescheduled by a bus line, airline, shipping line, rail authority or tour company, due to strikes or an Accident or Government action
Case Study of a tour cancellation by a traveller
A tour of Sri Lanka was booked to commence on 4 December 2025. The tour itinerary was a 14-day tour of 7 destinations and accommodation in Sri Lanka with a variety of cultural experiences. The international flights were booked separately.
The tour operator made comprehensive travel insurance a mandatory requirement for joining the tour.
Travel insurance was taken out. The tour price of $8,000 was paid. The airfares were paid.
On 28 November 2025 Cyclone Ditwah hit Sri Lanka.
The Australian Government Smart Traveller website had the following information:
 |
 |
 |
The advice was a DFAT Level 3 (Exercise a high degree of caution) Warning.
According to the media updates:
“Power and water supplies have been disrupted in several regions in Uva and Central provinces. Telecommunications are also severely affected in these provinces.
Landslide warnings have been issued. Torrential rains have resulted in flash floods, significant damage to infrastructure and casualties.
Roadways may be blocked by landslides or flood water. All trains and many international flights have been cancelled. Some flights have been rerouted.”
On 2 December 2025, the President of Sri Lanka declared a State of Emergency due to damage from flooding and landslides, and ongoing risk of flooding and landslides in large parts of the country.
Officials said that about a third of the country was without electricity, telecommunications or access to clean water. It was the most severe cyclone in 20 years. The President called for international aid and assistance, which was forthcoming from around the world.
The tour operator did not cancel the tour. They advised that the tour “is still proceeding, awaiting to see situation on ground with adjustments as needed in place to avoid affected areas.” They appeared to be relying on the ‘Change of itinerary’ Booking Condition to continue the tour with a changed itinerary. Had the tour operator cancelled, they would have had to provide a refund or a credit for a new tour.
On 2 December 2025, two days before departure, the traveller cancelled the tour due to the natural disaster having impacted most of the places in the itinerary and making travel unsafe.
The tour operator refused to refund the tour cost, relying on the ‘cancellation by you’ clause in the Booking Conditions. It was:
|
Cancellation by you If you cancel a trip: d) 14 days or fewer prior to departure, we charge a cancellation fee of 100% of the booking cost. |
The tour operator also refused to offer a credit for the value of the tour or to re-book to a future date.
The tour operator did issue a confirmation that the tour was affected by a natural disaster, to assist the travel insurance claim.
The traveller lodged a travel insurance claim under the cancellation cover, due to natural disaster, Cyclone Ditwah.
The travel insurer accepted the claim and paid the cost of the tour, less the policy excess to the traveller. The cost of the flights was refunded separately through the travel agency.
Cases where policy exclusions apply to exclude claims
If the travel insurer declines a claim, then a complaints resolution process must be followed for the disputed claim.
The traveller must write to the insurer’s internal dispute resolution section.
Then, if the complaint has not been resolved to the traveller’s satisfaction, appeal lies to the Australian Financial Complaints Authority.
On its website, AFCA publishes decisions.
These are a selection of decisions which deal with cancellation or disruption insurance:
Case number: 12-25-273126 (19 November 2025) The claim was for $3,532.25 for unused accommodation after adverse weather prevented a flight from landing at Port Villa, Vanuatu, the flight returning to Brisbane after 13 hours in the air. The claim was declined because it was not an event covered by the insurance policy – it would have been covered had a ‘natural events upgrade’ been purchased.
Case number: 12-25-231541 (29 August 2025) The claim was for $7,859.31 in cancellation costs (pre-booked travel costs). The travel plans were cancelled because of unfitness to travel due to a lumbar spine injury (lumbar condition). The claim was declined because the lumbar condition was a pre-existing medical condition.
Case number: 12-25-204753 (30 October 2025) The claim was for $921.80 for the costs of altering the traveller’s flights back to Australia due to her father’s passing. This was paid. The claim for $3,343.82 for the cost of the flights incurred in April 2024, to visit her father before her father’s passing was declined.
Case number: 12-24-148302 (26 March 2025) The claim was for additional expenses incurred after a cruise he was scheduled to take was cancelled because of the unrest in the Red Sea. The claim was declined because the unrest in the Red Sea and surrounding area fell within an exclusion for losses arising from war and violence.
Case number: 12-24-158232 (28 May 2025) The traveller was on a trip to Europe when he heard his grandmother had a fall and was hospitalised. He shortened his trip and purchased a new flight home so he could see his grandmother in hospital before she died. The claim for the cost of the early flight home was declined because the policy did not cover loss due to the illness, injury or hospitalisation of any person aged 85 years or older.
Conclusions
- Travel cancellation insurance is worth having especially for expensive, prepaid international trips. It protects against significant financial loss from unexpected illness, family emergencies, or natural disasters.
- Comprehensive travel insurance costs more but provides more inclusions. Cheap travel insurance is cheap for a reason – it covers fewer events, has caps on payments and contains more exclusions.
- Pre-existing medical conditions are standard exclusions in travel cancellation insurance policies.
And now, travel cancellation insurance from a marketer’s perspective –