TD Home and Auto Insurance Company, a subsidiary of TD Bank, has settled a class action lawsuit with Canadians whose trips were cancelled due to the COVID-19 pandemic, and one expert says the situation reinforces the importance of understanding what kind of travel insurance you're buying, what the consequences are and what you can claim for.

The lawsuit alleged TD Insurance breached the terms of its travel insurance policy around cancellation after denying reimbursement to those who were offered credits or vouchers from airlines, cruise lines, Airbnb.

TD Insurance has agreed to pay $4.8 million in compensation to those who were insured by a TD travel insurance policy between March 16, 2018, and Oct. 15, 2021, as well as $200,000 on account of costs and $100,000 on account of administration expenses, according to the settlement documents.

Martin Firestone, president of Toronto-based insurance broker Travel Secure, says the settlement is a good thing, adding that a voucher or credit wouldn't have been enough to satisfy travellers when there wasn't certainty around when people could actually travel again.

He says in an ideal world, all insurers would give travellers the option of getting their money back, subject to the terms and conditions of the insurance policy, or accepting a credit or voucher.

He says travellers should be aware that COVID-19 is now considered a "known cause" and cannot be used as a reason to cancel your trip, but noted that catching COVID-19 is now being treated like any other unexpected medical emergency and is covered in most cases. 

Firestone says travellers should not be deterred from buying travel insurance and should continue to do so because you don't know what the future holds.