03/19/2013 09:13 am ET Updated Mar 19, 2013

Carnival Cruise Lines And Why Third Party Travel Insurance Pays

Carnival Cruise Lines has had a rough few weeks, but as difficult as Triumph's drift, Dream's electrical failure and Legend's propulsion problems have likely been on the Carnival Corp. PR team, these seaborne debacles have been harder still on the boats' passengers. By way of making amends, Carnival has offered its indignant clients small amounts of cash and credits for exactly the sort of future cruises they probably want to avoid.

That said, Carnival didn't really have to offer the victims of their hospitality anything at all -- an argument, if there ever was one, for third party insurance.

Because no one goes to a cocktail party and talks about how great their recent trip insurance was, this part of trip planning goes undiscussed and winds up being misunderstood. Most cruisers simply purchase the insurance packages offered by the cruise lines themselves, policies that often offer travelers far more resources if their own bodies break down than if the ship does. Where cruise line insurance policies offer protection for both the traveler and the cruise line itself, third party insurance is all about the traveler.

The major difference between third party and cruise line insurance policies: Third party insurance providers can't hide behind tickets.

The idea of hiding behind tickets might conjure a strange image, but it is exactly what cruise lines do after disasters. Cruise tickets, after all, are binding contracts that limit cruise lines' liability while defining the scope of legal action that can be taken against them. Ask a lawyer how to sue a cruise line -- most of which fly foreign flags on their ships and operate in the grey area of international waters -- and prepare to receive legal advice in the form of a rueful head shake.

Even after Carnival offered Triumph passengers fresh off that floating port-a-potty $500 and a credit for a future cruise for their troubles, cruise lawyers admitted there was little that could be done. Dream passengers received a refund equivalent to three days of the voyage and 50 percent off a future cruise. Legend passengers got $100 back on pre-paid shore excursions and 50 percent off a future cruise.

These compensations were handed out to every passenger -- regardless of insurance -- at the discretion of Carnival itself. Having your company failing pay out on cable isn't great after all. Because Carnival credited the passengers willingly, insurance wouldn't much help, but what having a third party policy did give travelers was the knowledge that they had recourse, a way to recover the money they spent on a nightmare vacation.

A decent plan from a respectable and easy to use service like TravelGuard or InsureMyTrip will normally run the customer about 5 percent of total trip cost, barely more than the insurance offered by cruise lines. For travelers going on luxurious round-the-world cruises, this is an investment in a dream. For travelers going on a Carnival cruise to the Caribbean, this is just a good idea: Carnival cruises are both affordable and accident prone, making a third party plan cheap and almost mandatory.

Travelers with third party insurance also get a choice that is hard to put a value on, the chance to take their recovered money elsewhere.



Cruise Ship Adrift