Travel insurance: Check the small print or risk rejection

Airline failures, industrial action, volcanic eruptions and bad weather have combined over the last two years to highlight the value of the right travel insurance. Yet almost nine in 10 holidaymakers booking summer holidays this month - the busiest time of the year for organising trips - will end up uninsured, under-insured or wrongly insured, according to research out today from insurer Axa.

Two thirds of those surveyed by Axa wrongly believed they would be covered for any delays relating to volcanoes, earthquakes or tsunamis, while six in 10 mistakenly assumed they would be covered for accidents that occur when they are under the influence of alcohol.

However it said high profile travel disruption over the past two years means a fifth of holidaymakers are now more likely to buy travel insurance than they were a year ago.

But securing travel insurance is just the start - making sure you have the right cover is equally important. If you focus only on price you risk neglecting to check vital details that could make the difference between a payout and a rejection.

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There were almost 2,000 complaints to the Financial Ombudsman Service about travel insurance policies between April and December last year, up from 1,400 in the same period the previous year, while the number of inquiries jumped from 3,500 to 5,000. Many of the complaints concerned claim rejections, often where the policyholder was unaware of clauses and exclusions in the small print.

So here are some of main policy features to look for when buying travel insurance:

EXTENT OF COVER

Many people find out to their cost when they claim that their insurance fails to pay the amount they need, according to Ian Crowder, of AA Insurance.

"It's easy to buy the cheapest policy on a comparison site, but when it comes to claim you may find that some important aspects are missing and that the level of cover is quite poor."

This is particularly relevant to medical expenses, which can compound rapidly in the event of hospitalisation overseas. Experts recommend cover of at least 2 million for emergency medical costs and repatriation.

Roman Bryl, underwriting manager at Axa, said medical problems account for more than two thirds of travel insurance claims. "The average claim cost involving a hospital stay is 1,400. Serious medical claims can cost hundreds of thousands of pounds," said Bryl.

Baggage is another area in which travellers often under-estimate the cover needed. The amount is dictated by the value of the luggage you have and the insurance should cover both delayed and lost luggage.Also check the cash allowance is sufficient to cover the money you'll be carrying, as this can be very low on some policies.

Steve Williams, head of travel insurance at Confused.com, said: "People tend to overlook the single item limits, which they can easily exceed if they've got a camera, laptop or other electronic equipment."

You may not need the baggage element if your home insurance covers your possessions anywhere. If it does, tell your insurer you don't want baggage cover - you should get a reduction if it agrees to leave it out.

CANCELLATION COVER

Recent weather-related disruption to flights served as a reminder of the need to ensure decent cancellation cover. This also provides insurance in the event of other circumstances forcing you to cancel your trip, such as a death in the family or being made redundant.

Comprehensive cancellation cover includes having a policy start date ahead of the actual day you embark, to cover delay and cancellation announcements. A good tip is to buy the insurance when you pay for the trip, or soon after. Most experts recommend cancellation cover of between 2,000 and 3,000.

EXCLUSIONS

The popularity of comparison websites means consumers increasingly search on price and overlook the actual contents of a policy. However the cheapest policies are more likely to contain exclusions, with some of the deals in the best-buy tables on comparison websites excluding vital elements including pandemic illness and airline failure.

The latter is an exclusion that has cost thousands of holidaymakers dearly over the past two years following the collapse of airlines including XL and Edinburgh-based Flyglobespan.

But Williams said: "Less people are interested in this now than two years ago. We're about to take airline failure off our list of key benefits as so few people are affected by it and because the terms can be so stringent."

Yet with more airline collapses all but inevitable, it remains wise to ensure your policy will pay out in the event of failure.

Most insurers now cover airline failure, but not all of them.