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Travel insurance amid ash cloud disruption

27 April 10 23:22 GMT

Money Talk
By Graeme Trudgill
British Insurance Brokers' Association

The recent volcanic ash saga came as a nasty surprise to many people.

It was not just the fact that planes were grounded for days and travellers found their plans were severely disrupted, but that many people discovered that their travel insurance did not cover them as much as they thought.

In many cases people found that claims for financial loss, or extra expense, caused by the knock-on effect of the Europe-wide ash cloud, were simply excluded by the terms of their insurance policy, or their insurer's interpretation of the wording.

Many choices

There are 23 million travel insurance policies sold every year.

The more mainstream brands tend to focus on standard, uncomplicated risks which are cheaper and easier to provide cover for than higher risk categories.

The cover offered by many online products can be very basic indeed.

So what can travellers do to ensure they buy the cover they actually want and need?

Policies may all seem alike.

However, with some 165 different brands, with varying terms and levels of cover to choose from, it is vital that individuals buy a policy that is appropriate to their needs.

Travel insurance policies cover eventualities in upwards of 20 different sections, from skiing piste closures to pet passports.

Buyers need to be aware how to identify a truly great deal from an unsuitable "bare bones" economy policy.

Everyone is different so the golden rule is for the buyer to consider their own personal circumstances.

For example, how expensive is the digital camera being carried?

Is it a £10,000 cruise that is being taken or a day trip across the Channel?

Is horse riding a likely activity while away?

Is a glass of wine or two in the evening acceptable?

The big three

The top three travel claims received by insurers are medical, cancellation and lost baggage.

Medical claims make up 57% of all claims, but insurers have different attitudes towards pre-existing medical conditions.

For example, some will readily accept diabetes whereas others may charge a higher premium to agree to accept it, or they may reject the risk completely.

It is vital that the buyer discloses all details to the insurer via its medical screening line during the quotation process and makes a record of this notification.

Disclosing the pre-existing medical conditions of all those travelling, no matter how slight, is a must.

If your quotes appear on the high side, you can contact a relevant charity - depending on the condition - to see if there is a more suitable insurance provider.

Alternatively, there is British Insurance Brokers' Association's Find a Broker service on , which will match the individual to a relevant insurance broker that specialises in a particular medical condition, such as breast cancer.

It pays to get a second opinion. Cover does not have to cost the earth or have onerous exclusions just because the buyer has a pre-existing medical condition.

Some, but not all, insurers have a pandemic exclusion so buyers should not expect to be covered for swine flu if this is the case.

Some insurers also have a total alcohol exclusion under their policies and will not accept claims relating to an alcohol-induced injury.

Cancelled trips

Cancellation or curtailment of a holiday leads to 32% of all travel insurance claims, but cancellation limits vary greatly between insurers.

It is vital that any policy bought reflects the cost of irrecoverable deposits. For example, a £3,000 cancellation limit will be lower than the cost of many cruises.

For cancellation, most travel insurance policies cover specified perils such as serious illness or jury service.

However, policies do not tend to cover "all risks", such as volcanoes erupting.

An authorised insurance broker or intermediary should be able to advise buyers unsure of how their policy responds.

In the bag

Lost baggage leads to about 7% of all travel claims and the limits of cover can vary dramatically.

Many people owning items such as iPhones and expensive digital cameras may find that their bank's "free" travel insurance is no longer quite so attractive if they discover the level of cover provided is insufficient.

It is therefore important to seek out a policy that offers a sufficiently high limit on the value of the personal possessions being taken abroad.

The valuables limit on a policy is usually quite low - often only £250 - although others cover up to £1,000, so it can be worth the buyer seeking a wider policy with higher limits or adding them to an existing home insurance policy.

It is important to remember that the personal possessions section under a home insurance policy is likely to cover possessions anywhere in the world, so buyers need to ensure that they do not double up on premiums.

Deleting the personal baggage element from a travel insurance policy because it is already covered under a household policy can result in discounts of up to 15%.

Other claims

Only one in six policies cover financial failure of the airline or holiday accommodation, so this form of cover is advisable if the holiday is being booked with an obscure provider.

Insurers are also split in their attitude towards providing terrorism cover. Approximately a third have totally excluded paying out on claims arising from acts of terrorism.

It is important to consider the excess as policies differ dramatically.

Some are harsh with a £60 policy per section.

Thus a stolen handbag could result in the policyholder paying £60 for the bag, £60 for the lost passport, and £60 for lost money, resulting in the policyholder having to pay out a grand total of £180 before they get any compensation from the insurer for the theft.

Other policies may have just a £40 excess and this may be only per claim, rather than per section, which works out much cheaper for the policyholder.

Also be aware that the excess applies per person, so look for a policy with a family excess, where only one excess applies even if bags belonging to five family members are lost.

Taking a risk

Insurers differ massively in terms of hazardous activities.

Different insurers could accept you at normal terms, charge extra, or decline completely any cover for claims resulting from the policyholder taking part in hazardous activities while away, according to their own criteria.

It is important that the buyer is aware what hazardous or sporting activities are allowed by their insurer before they go away.

Activities that are easier to insure include horse riding, cricket and parasailing while the harder activities include white-water rafting, scuba diving in depths of more than 30 metres and bungee jumping.

Weather section

What about a volcanic eruption?

This is a very unusual event and different insurers have different interpretations of this peril.

Some are responding under the travel delay section of the policy due to adverse weather, which means people can make a claim under their policy, but other insurers regard an eruption as a geological event which they do not cover.

Members of the public seeking to buy cover now will find it difficult to do so, as the ash cloud is no longer an unexpected event.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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