Hi
This issue was raised back in July. I believe most companies will cover cancellation if one of the immediate family covered under a policy were struck down with swine flu. The would cover the cost of cancellation of all 4 of the family and not just the one with the flu. Any claim would be subject to a doctors note.
http://www.moneysupermarket.com/community/forums/t/swine-flu-travel-insurance-and-doctors-notes-36881.aspx
If you read the thread, Felicity King-Evans in one post confirm the ABI position on this.
Swine flu is treated no differently from any other illness by travel insurers.
Travel insurance will typically cover the cost of medical treatment abroad if people contract swine flu while on holiday. It will also cover the cost of rearranged flights and accommodation for anyone covered by the policy.
People diagnosed with swine flu before they are due to travel abroad, and any immediate family members (spouse, parents and children, with some policies covering other relatives) due to travel with them, will be covered for the cost of holiday cancellation. Under normal circumstances a doctor's certificate is required to confirm that the customer was not fit to travel, but given the current circumstances we would expect insurers to be flexible on the time it takes to obtain such a certificate.
What I would suggest that you do is arrange cover by phone so you can ask the question. This is just in case any Insurer has changed their position on this issue or has certain endorsements/claim terms you need to made aware of.
Huckster