UPDATE: On Friday afternoon, Covermore announced it was suspending sales of its "Cancel for any reason" travel insurance in Australia and New Zealand.
Covermore CEO, Asia Pacific, Judith Crompton said the decision was made for an interim period while the company assesses the risk profile and immediate sustainability with Zurich, Covermore's underwriter in Australia and New Zealand.
"Cover-More is very proud of our CFAR product which we have pioneered in Australia and New Zealand since April 2018. And we absolutely want it to build into a long-term sustainable feature of our travel insurance offer in the Australian and NZ travel markets."
"We have not taken this decision lightly and we stress that we hope this suspension will enable us to keep CFAR in market in the longer term."
"We are in unchartered waters and unprecedented times for the travel industry with the global impact of the coronavirus (COVID-19) outbreak and we will continue to do everything we can to support our travel agents and partners and Australian and New Zealand travellers," Ms Crompton said.
Our original story below
As the coronavirus outbreak becomes more widespread, travellers worldwide are cancelling trips or delaying holiday plans, forcing airlines to cut flights.
On Tuesday Qantas said it would slash a quarter of its international flight capacity in response to the drop in forward bookings, while carriers in Asia have been hit even harder.
Many holidaymakers are reluctant to travel without travel insurance, with most providers refusing to cover medical expenses or cancellations due to the virus since it became a "known event" in late January.
But there are ways you can have limited cover. Covermore still promises to insure most of its customers who contract coronavirus overseas.
"The vast majority of our policies provide cover for medical expenses if you travel overseas and contract the coronavirus," a spokeswoman said.
Cancel for any reason (CFAR) insurance, which is more widely available in the US than Australia, is also offered through Covermore. The insurer offers the product through NRMA Insurance and a range of travel agents including Flight Centre, Helloworld or Travellers Choice.
CFAR provides coverage for 75 per cent of non-refundable travel, up to a limit of $10,000.
"If customers purchased our CFAR add-on before they paid for their travel, there is also cover available for cancellation."
A Covermore spokeswoman said the insurer had seen a boost in enquiries about the product.
"We are receiving a significantly increased volume of calls and emails about coronavirus and our Cancel For Any Reason add-on," she said.
Choice insurance expert Jodi Bird said CFAR cover is an "additional premium on top of your standard insurance".
And he warned there are strict conditions, like purchasing the cover within 48 hours of booking your flights. The cancellation must also be made within 48 hours of the flight, so if your travel destination is cut off the day before your trip, you're out of luck. And the cover is not cheap.
"Anecdotally someone was quoted $750 for a four-week trip to Europe, that's on top of their regular insurance," he said.
Julie and Peter Oakes, from Robertson near Bowral in NSW, warned that the extra coverage was totally meaningless if it wasn't purchased within 48 hours of booking flights.
The retired couple is cancelling their trip to the UK in June over fears of the coronavirus, and say the $700 CFAR insurance was no help in recouping costs.
They purchased the coverage about two weeks after booking their flights in December, but say they weren't warned about the 48-hour time limit at the NRMA office (though it is listed in the Product Disclosure Statement).
"We couldn't believe it," Ms Oakes said.
Their flights can be refunded through the travel agent, but the couple wants their $700 back. NRMA Insurance has been contacted for comment.
Mr Bird said the CFAR policy was also unlikely to cover coronavirus-related cancellations once your trip has begun.
"For example if you're in the US and you get put in hospital or quarantine you're going to have pretty expensive costs."
NRMA says it "wouldn't cover cancellation costs if your tour gets cancelled because of the coronavirus outbreak".
While most insurers have declared coronavirus a "known event" which voids their coverage, Mr Bird said he's heard of some instances where consumers have been able to get their insurer to agree to provide medical cover.
"It's a case by case scenario of getting coverage. I think they're assessing and going there's not a huge risk of incurring medical expenses in Bali at the moment so we'll cover you - but they're not advertising that.
"If Indonesia suddenly announces 1000 cases they'll probably cut off coverage.
"I think they're very concerned about the upside of the risk so they're not going out and publicising it."
Mr Bird said travellers are generally more protected now than in the past, with more than 90 per cent of people taking out travel insurance before they go overseas.
"Where the under-insurance has crept in is people understanding what they're covered for. People just expect they buy insurance and they'll be covered for a pandemic but this has highlighted that's not the case."
Mr Bird said last week the underwriters of Budget Direct, Auto & General Insurance, updated their terms and conditions to exclude pandemics and epidemics from future coverage.
"If anything else happens from this point on [beyond coronavirus] they won't cover it, which is annoying."
ING is also underwritten by Auto & General Insurance, but at the time of writing was still covering coronavirus-related issues so long as Smart Traveller advice is followed.
Mr Bird said he believed there had been "a surge in demand" for cancel for any reason insurance.
"Speak to the insurer to see if there's any room for flexibility," he said.
"There's a lot of room for confusion, definitely."
On Wednesday, the Insurance Council of Australia declared a catastrophe for the Covid-19 and UK insurance giant LV has stopped selling travel cover to new customers altogether.
InsureandGo has been offering a 15 per cent discount on travel insurance to subscribers of cheap travel site I Know the Pilot, with no mention that it won't cover losses as a result of coronavirus.
The insurer says coronavirus was a global "known event" from January 31, and a known event within China from January 21.
Travel Insurance Direct won't cover any claims related to coronavirus globally after January 31, or in China from January 23.
"This means that we are no longer covering claims arising from ANY event related to COVID-19 for policies purchased after the relevant time however, you are more than welcome to submit a claim for our consideration," the insurer says.
AIG Australia blocked coronavirus cover from January 24, after which it considers travel issues foreseeable.
"As always, each claim will be considered on its merits taking into account the individual circumstances of the claim and the terms and conditions of the policy."
Allianz also isn't covering travel issues due to coronavirus after January 31, though claims will be assessed in accordance with policy wording and the circumstances.
1Cover says coronavirus was a known event from December 6, and the insurer excludes coverage for epidemics and pandemics.
Fast Cover does not cover epidemics, pandemics, or known events. Coronavirus-related travel issues will not be covered even if the flights and policy was purchased before it was considered a known event by the insurer from January 24.
Travellers should check the Smart Traveller website and contact their insurer.