Five pitfalls to avoid when choosing your next travel insurance policy

Booking a holiday can be the perfect antidote to the January blues, but travel insurance is often an afterthought.

Anna-Marie Duthie, Travel Insurance Expert at Defaqto, said: “The most common mistake when it comes to travel insurance is waiting until you’re about to set off on your holiday before taking out a policy. Unfortunately, things out of our control can go wrong before we set off, so having the right insurance in place as soon as you book your holiday means you are covered straight away.”

Data from Defaqto, one of the UK’s most trusted sources of financial product and market intelligence, highlights the policy details that holidaymakers need to be aware of to avoid finding themselves at financial risk.

Most annual travel products include cover for cancellation as standard, but 4% only offer it as an optional add-on and 2% offer no cancellation cover at all.

Anna-Marie Duthie said: “It’s important to check that the benefit limit under the policy for cancellation/curtailment is enough to cover the cost of your holiday, as well as ensuring you are aware of which scenarios would be covered should you need to cancel.”

In recent years, the failure of airlines, travel or accommodation providers has impacted thousands of would-be holidaymakers. Data from Defaqto shows that 65% of annual products provide no cover for scheduled airline failure and 62% do not provide cover for financial failure.

% of Annual Products	Scheduled Airline Failure	Financial Failure
No cover	65	62
Optional cover	0	5
Standard cover	35	33

 

Anna-Marie Duthie said: “If this does happen, you should get some form of refund from the supplier themselves or you can go through your credit card company (if you paid by those means). However, if you are booking each item of your trip such as your flight, accommodation and transport, separately and do not have the assistance of a tour operator, choosing a travel insurance policy with cover for this is particularly important.”

It's also important to consider any additional cover that may be needed for winter sports or cruise holidays.

Defaqto data shows that out of over 1,100 annual travel policies, 13% provide winter sports cover as standard, 79% offer it as an option and 8% will not cover a winter sports trip at all. For Single Trip policies, 7% provide winter sports cover as standard, 84% will only do so if chosen in exchange for an additional premium and 9% will not cover a winter sports trip at all. 

Winter sports cover	% of Annual Products	% of Single Trip Products
No cover	8	9
Optional cover	79	84
Standard cover	13	7

 

Similar numbers will provide specific benefits, such as cover for ski hire, piste closure etc, with 79% offering these as an option (in exchange for an additional premium) and 12% providing them as standard.

For cruises, specific benefits can be cover for formal attire, cabin confinement, missed ports or interruptions.

% of Annual Products	Cruise Trip	Cruise Benefits
No cover	13	40
Optional cover	43	56
Standard cover	43	4

 

Level of excess can have a huge impact on the requirements placed upon you should you need to make a claim.

Premiums tend to reduce if a higher excess is selected, with many insurers now providing various options to choose from. It can be tempting to increase the excess in order to pay less for the policy, however before you confirm which excess amount you are willing to pay, check the ‘basis’ by which these are applied.

Excess amounts may be applied:

• per claim – one excess amount is applied for each claim you make
• per person – the excess amount is charged for each person who is involved in the incident
• per person, per section – the excess amount is charged for each person who is involved in the claim and also for each section under which you are claiming

For example, if you and your partner have your luggage and money stolen, and your policy excess basis is per person per section, you would be required to pay the amount for you and then again for your partner and you would be claiming under the baggage and money section for each of you and so that would mean a total of four excess amounts being applied.

Excess Basis	% of Annual Products
No excess	11
Per claim	2
Per person	29
Per person, per section	58

 

Top tips when choosing your travel insurance:

• Take out your insurance when you book, to ensure you are covered should something go wrong in the lead up to your trip.
• If you can, book travel on a credit card, as this provides you some protection if the suppliers fail. Also consider if you are booking your accommodation, and travel independently check your insurance policy to ensure you will be covered if you have purchased things in this way.
• Ensure you have adequate cover if going on a winter sports or cruise holiday. Check whether activities you will undertake whilst on holiday are covered by your policy.
• If you’re choosing a ‘family policy’, check the ‘family’ definitions. If you're part of a modern family, it's quite common to have children from different parents who live apart.  Some policies define a family as "you, your partner, and your children WHO LIVE WITH YOU".  This means if you intend to take your children who live with the other parent, they would not be covered under some "family" policies. 
• Always check how the excess is applied and try to avoid opting for high excess amounts on a ‘per person, per section’ basis.
• Check any cover you may already have in place. You may have cover for your baggage under your home insurance if you have worldwide personal possessions cover. Check your bank account - if it is one you pay a monthly fee for, travel insurance may be one of the benefits provided. You may also have existing annual travel policies in place, so check that they will cover all aspects of your next trip. For example, if you weren’t originally intending to go skiing when you brought the policy but now you are.