Will my travel insurance cover me?

If an airline goes bankrupt before or during your holiday, it could be curtains for your holiday plans. Given that airlines are going bust on what now seems like a weekly basis, it is prudent to make sure that you have some protection in the form of financial default insurance.

As a rule, financial default insurance is usually only provided if an airline has completely ceased trading, regardless of bankruptcy proceedings. Also, in order for it to be valid, you have to buy your insurance no later than two weeks after you have paid your first deposit on a holiday.

It is worth investigating the small print of your travel insurance policy before you buy, as some of the more stripped down packages do not offer financial default cover as standard. Also, steer clear of buying insurance directly from the airline you are travelling with, as they cannot pay out on a claim if they are bankrupt themselves.

Financial default cover is usually only applicable to airlines, cruise lines, and tour operators, and not to independent travel agencies, so if you are booking through an agent, make sure that they are licensed through a guarantee scheme such as ABTA.

Some package holidays use a combination of different travel suppliers, which can complicate the issue. Most financial default policies will only pay out if you have to miss your whole trip as a result of the bankruptcy of a travel supplier, so if you are flying out to the Caribbean to catch a cruise liner, and the airline that is taking you out there goes under, causing you to literally miss the boat, then you will be entitled to full compensation.

You will need to check your policy documents to find out if there is a waiting period before the default coverage takes effect. Some policies state that the financial default of the travel supplier must take place at least a week after you have bought the policy in order for you to be covered.

Also, you should check whether the underwriter of the policy has a list of approved travel suppliers. If they do, and your travel supplier is not on the list, then you will not be covered if they go bust. Do not assume that most reputable suppliers will be on the list, as these lists can be surprisingly short.

To sum up, make sure you get your travel insurance sorted as swiftly as possible after you have booked your trip, check the small print, and make sure that you do not buy insurance directly from your airline or travel agent.

About the Author:
Going on holiday, be it at home or abroad, is supposed to be a pleasurable experience.