(Reuters) – In the new reality of COVID-19, some Americans may still be willing to travel abroad – but they’re going to make sure they’re insured up to the hilt.

U.S. travel insurers are seeing a surge in demand for highly priced “cancel for any reason” policies as holidaymakers planning to venture out in the months ahead seek the kind of comprehensive cover that was seldom seen pre-pandemic.

With the prospect of countries moving in and out of lockdown restrictions to weather waves of the new coronavirus, travelers are taking few chances with their cover. Thousands were burned earlier this year when policies provided by websites, airlines and agents did not pay out when governments imposed travel bans.

As destinations in Europe and Asia ease lockdowns, several U.S. industry figures told Reuters this week that holidaymakers booking for later in the year were paying around 40% more for insurance as a result.

Data from U.S. comparison website Squaremouth shows purchases of the comprehensive any-reason cover surged by 680% compared with a year ago. The data is based on policy purchases from April 1 to May 10, for travel in June, July or August.

More than a third of holidaymakers planning summer trips searched for a policy that included cancellation or medical coverage if they contract COVID-19 or are quarantined. 

“Everybody hears about the possibility of a resurgence of COVID-19,” said Jeremy Murchland, president of U.S. travel insurer Seven Corners. “People are looking for the one insurance policy to give them the most flexible options.”

The shift in behavior is one area of opportunity for an insurance industry that has been hammered by the crisis, and is a rare area where they can develop new products.

However it also leaves the sector, which already faces huge and varying claims from businesses and households hit by the pandemic, on the hook for bumper payouts should a new wave of infections force new travel restrictions or create alarm.

The “cancel for any reason” cover includes travelers who pull out due to the fear of contacting the novel coronavirus, provided they cancel the trip within two days of departure.

For the wider tourism industry, more expensive insurance cover could suck up cash that travelers would otherwise spend abroad on hotels, restaurants, shopping and excursions.

BOON OR BANE?

In one simple search on Seven Corners, standard round trip cover for a $5,000, 15-day holiday from the United States to Italy cost $171 per head for a standard policy but $240 for the comprehensive cover, adding up to several hundred dollars when applied to families and other groups.

“The cancel for any reason policy was an option before, but it is more expensive, which is probably why it wasn’t popular,” Squaremouth spokeswoman Kasara Barto said.

“When the pandemic occurred, travelers had concerns that were not covered. That is when it became the best option.”

World Nomads, which insures independent travelers from more than 130 countries, surveyed more than 2,000 visitors to its site over the past two months, asking them about their travel intentions “post-COVID-19”.

Over a third said they would start traveling in less than a month, while 55% said they would travel within three months, with top destinations spread across Europe and Asia.

A total of 72% said they would purchase insurance for trips abroad, up from 38% in 2018.

“COVID-19 has raised awareness that sometimes unforeseen calamities do happen,” said World Nomads CEO Anna Gladman.

There are risks for the insurers too. While U.S. firms paid out little for canceled trips under the initial wave of lockdowns, peers in Britain – where policies often cover government bans – are facing a record 275 million pounds ($345 million) this year.

The coronavirus pandemic and national lockdowns are unprecedented, and there is little certainty if the surge in interest for all-in travel cover will prove a boon or bane for the insurance industry.

Erik Josowitz, an analyst from another U.S. comparison site InsuranceQuotes.com, stressed the American industry was in uncharted territory.

“In the near term, I would expect this to be a revenue boost for travel insurance providers,” he said. “But we’ve yet to see how these new types of policies will play out in terms of claims.”

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