Will my travel insurance cover me?

If you are worried that the airline you are travelling with will go bankrupt before or during your holiday, you may want to get a travel insurance policy that offers financial default insurance. However, not all travel insurance policies offer this as standard, and some only offer it under certain conditions, so you may want to check the small print on your policy documents before signing them.

Financial default cover usually only applies if an airline has completely ceased trading due to financial reasons. Even if a policy includes this as standard, it may only apply if you buy your insurance less than a couple of weeks after you book your flights.

Some of the less expensive travel insurance packages do not offer insurance against airline bankruptcy as standard, so it is well worth your while checking the exact wording of the terms and conditions of your policy before committing to buy.

This type of cover will not protect you if your travel agency goes under, as travel insurance policies usually specify that financial default coverage only applies to travel suppliers, such as tour operators, airlines, and cruise lines, and not to the company that sold you your travel insurance.

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.

In order to prevent a rush of insurance orders following the announcement that a travel supplier is in financial difficulties, there is usually a waiting period written into the insurance policy. This can range from a few days to a few weeks between buying a policy and the travel supplier declaring bankruptcy.

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.

The best policy is to buy your insurance from an independent supplier as soon as you can after booking your holiday, and make sure you check the small print before you sign.