Edgy meeting planners looking to hedge their bets might think twice if they expect cancellation insurance to cover some of their current challenges.

Contrary to what many believe, meeting cancellation insurance only covers cancellations due to causes beyond the parties' control, says Tyra Hilliard, Esq., CMP, a Washington, D.C.-based attorney. “If you have to cancel because of low pickup or because your executive director wants to hold a meeting somewhere else, you're not covered. If the the airlines are grounded, you're probably covered.”

And even some things you can't control — such as war — are also exempt from coverage. War is excluded across the board unless it causes a disruption in airline service, for instance, and attendees can't reach the destination. But if attendees don't come because they are afraid to travel, you're not covered.

Even if you think you know what your policy covers, you should double check. While some policies say they cover health emergencies, epidemics, or outbreaks of virus, in mid-April, insurers started specifically excluding SARS virus coverage because they don't know enough about the disease.

Pay Big for Protection

Perhaps the biggest long-term concern is the potential negative impact of terrorism. Before September 11, 2001, policies didn't mention acts of terror as causes for a claim. The huge losses related to that day resulted in many carriers excluding the effects of terrorism on an event's viability. But federal legislation signed in late 2002 requires property and casualty providers to offer full terrorism coverage.

Naturally, that kind of coverage comes with a hefty price tag. Eileen Hoffman, program manager for AON Association Services in Washington, D.C., says the carrier she represents offers three choices: the option to decline terrorist coverage completely; reimbursement for 50 percent of losses with a limit of $250,000; and full coverage. The terrorist attack must occur within 25 miles of the venue no more than a month before the event. Full coverage “is expensive,” Hoffman says. The majority of planners opt for a less comprehensive policy.

Do the Math

Pricing a policy doesn't follow any simple rule of thumb. Hoffman says carriers evaluate a number of factors when pricing a policy, including the location, time of year, and budget or revenue projection for the event. A meeting in Miami during hurricane season, for example, will cost more to insure than the same meeting in Kansas.

Besides what is covered — and excluded — expected losses are probably the most important consideration in deciding whether a policy makes sense. “A $5,000 premium for a policy is too much if the organization stands to lose only $1,500 if the event isn't held,” Hilliard says. “But if the event is an association annual convention that creates 50 percent of the association's operating income for the year, a $5,000 premium might not seem so high.”