Travel insurance bolt-ons push up premiums

Your travel insurance may be about to get more expensive as insurers adapt their policies in the wake of the recent collapse of Monarch and the pilot rota fiasco at Ryanair.

From the end of November Staysure, which specialises in over-50s holiday cover, will introduce “end supplier failure” cover as part of all of its products. This will allow you to claim back the cost of a holiday cancelled because of the collapse of a company — including airlines, hotels, car and caravan hire companies and tourist attractions.

Most policies on the market do not cover this eventuality as standard.

It is not clear, however, whether all customers will experience a rise in their premium. Ryan Howsam, the chairman of Staysure, says: “We haven’t reached any conclusions as to whether there will be any changes in pricing. We are hopeful that we will be able to incorporate the benefit into our product with a minimal impact on premiums.”

Other insurers have adapted to consumers’ growing anxieties about holiday disasters by making products increasingly complicated, according to Brian Brown, the head of insight at Defaqto, the financial research company.

That means more “bolt-on” cover, which boosts your basic policy, but at a cost. A bolt-on offers you flexibility to pick and choose the kind of cover you want but the downside is that this is almost always more expensive than buying an all-inclusive product.

Fiona Macrae from the website Travel Insurance Explained, says: “For travel insurance companies to win in a competitive market, they will offer consumers very basic policies, with the opportunity to buy ‘add-on’ cover for things like gadgets, extra activities, or protection against forces of nature, such as hurricanes and wildfires.

“There are some policies that will offer you more extensive cover without these, though. They aren’t the cheapest option initially, but by the time you have paid for all the different add-ons to a standard policy, they not only tend to be the most cost-effective but can also help take the guesswork out of picking a policy.”

Of the 930 travel insurance policies on the market, 138 offer terrorism cover as standard and 456 offer cover for scheduled airline failure — with 101 offering this as an optional extra, up from 24 in 2014, according to Go Compare, the comparison website.

Dr Matthew Connell, director of policy at the Chartered Insurance Institute, says: “Travel insurance may only cover you for the cost of cancelled flights, and not for costs such as accommodation that is also wasted when you can’t fly.

“This wasn’t such a big problem when the cost of flights was the highest single cost of a trip, but nowadays people often buy cheap flights and splash out on a nice hotel, so the cost of accommodation, which often isn’t insured, can be several times higher than the flights, which are.”

Accommodation, which often isn’t insured, can be several times higher than the cost of flights

The number of “new” options available to tack on to basic single-trip travel insurance policies is growing, says Mr Brown, including cover for dangerous or extreme activities, scheduled airline failure, financial failure of other companies, catastrophe cover, airspace closure cover, and enforced stay abroad cover.

Peter Hayman of PJ Hayman & Company, a travel insurer, says stand-alone travel disruption insurance was introduced after the Icelandic ash cloud, which shut down much of Europe’s air space in 2010. “It will pay where the traveller is unable to recover or be reimbursed by a carrier or tour operator.”

Mr Hayman’s view is that it is better to build this type of cover into a contract at the outset, which is better value than paying an add-on premium. “Gadget cover is becoming increasingly popular, but again better value can be had by looking at schemes that include the cover rather than charging a top-up premium,” he says.

PJ Hayman does, however, offer a Top Up My Cover scheme, where you can add top-ups to the cover you have with another insurer if you feel it falls short for a specific trip. At the moment you can buy top-up cancellation cover of up to £15,000 per person. This is useful where you have a travel policy as part of a bank account or an annual multi-trip insurance policy with a typical limit of £5,000 for cancellation. If you’re embarking on an adventure holiday, you can buy its hazardous activities top-up.

The first stand-alone terrorism travel insurance policy was launched this year by Safe Journey and covers you for any cancellation or curtailment of a holiday as a result of terrorism.

Alpha travel insurance has a series of bolt-ons to its single and multi-trip policies such as a stop-over extension. Its financial failure and force majeure cover means that you can cancel your holiday if there is a natural disaster or a company goes bust.

Sophie Phillips, the brand manager at Alpha, says these were introduced in 2012 “so we could keep our policies reasonably priced and customers had the option of tailoring their policy to match their needs, rather than paying for a more expensive policy with features they didn’t need, ie gadget or cruise cover”. She warns against trying to get cover for existing disasters, ie if you are worried last month’s hurricane will affect your holiday. Once the event has begun, you cannot insure against it.

“The main purpose of travel insurance is to cover bills for emergency medical treatment overseas,” says a spokeswoman for the Association of British Insurers. “In a changing market, insurers are always adapting and creating new products to cover risks. As always, it is important for people to shop around for the most appropriate cover to suit their individual needs.”