In the last few weeks, we’ve received several queries around why travel insurers won’t provide a cash refund for a cancelled holiday if a voucher or credit note has been offered by the holiday provider.
Here we explain the reason behind this and outline the steps you can take to recover your holiday costs if a voucher or credit note is simply not an option.
More often than not, travel insurers won’t offer holidaymakers a cash refund if they have been offered an alternative method of reimbursement. The reason for this is because insurance policies are designed to put customers back in the same financial position as they were before a loss.
This is standard across all different types of insurance, including, car, home, and gadget, and is one of the six principles of insurance.
Indemnity: “Placing the insured, as nearly as possible, in an equal financial position after a loss, as that occupied immediately before the happening of the insured event. This implies that the insured should not be over-compensated; neither makes a profit out of the loss.”
So, if a holidaymaker has been able to get a refund, move their holiday to a later date, or use a voucher to re-book their trip for later on in the year, then there’s nothing to claim back. This is because there is no loss and the customer will, at some point, receive the service they paid for.
Let’s put this into a different perspective. Imagine you buy a top from a high-street store, but when you get home it doesn’t look right. You take the top back to the shop and ask for your money back. The shop offers you a credit note as per their refund terms and conditions.
The credit note allows you to spend the same amount as you paid for the top on another item of clothing in the shop. The money you originally spent is now in a voucher form and you can use this to buy a different top. You have not lost this money but merely saved it to use at a later date.
But what happens if you do not wish to accept a voucher or credit note for your postponed or cancelled holiday? Well, there are several laws in place which protect customers and their money in these circumstances, especially when it comes to travel.
First of all, travellers should check their holiday providers’ terms and conditions.
If you booked a package holiday through a tour operator, they are responsible for providing you with a refund under the Package Travel Regulations Act. While some tour operators may not offer a cash refund as an option in the first instance, you have the right to demand this.
Similarly, under EU law, airlines are also responsible for providing a cash refund they cancel your flight. However, this obligation unfortunately does not apply if you cancel your flight.
It is worth noting the cancellation terms when you are booking your holiday independently, e.g., separate travel and accommodation, as many providers offer lower rates if you pay in full at the time of booking, and, as part of the conditions, advise that there is no refund available for cancellation.
Where there is no refund policy or law in place, customers are often offered vouchers or credit notes. If this isn’t suitable the customer may need to speak with the holiday provider directly and explain why a cash refund is more appropriate for their needs.
At this point, if the customer isn’t satisfied with the solution offered by the travel provider, we would recommend getting in touch with your travel insurer to see what your options are and what evidence they required in order to process your claim. But be prepared to provide proof that any offer of credit notes or vouchers from the travel provider has been declined and accepted in writing.
At the end of the day, whether travellers accept an alternative option to a refund is completely down to the individual and their circumstances. Although, it’s worth considering these options if you don’t have the relevant cancellation cover on your travel insurance policy. It is important to note that travel insurance providers do not all offer cancellation for any reason on all of their policies. So, if you are booking travel or accommodation with restricted cancellation conditions, it is advisable to ensure that the travel insurance policy you buy offers cancellation for any reason beyond your reasonable control, or similar cover. If you are unsure of the cover you need, we would recommend talking to your travel insurance provider directly.
If your holiday has been affected by the coronavirus outbreak and you’re looking for guidance on how to recover lost costs, you can find more detailed information on the steps available here.