Holiday insurance cancellation cover is usually included as standard with travel policies, and can provide a considerable benefit to those who may be unable to travel once they have booked their holiday.
It is one of the key costs that insurance protects against, along with overseas medical expenses, personal liability and baggage.
Generally speaking, cancellation travel insurance pays out up to £1,500 (some premium policies will pay up to £5,000) if your trip is cancelled or cut short due to reasons specified in the policy.
Equally, if you cancel an inclusive package, then the travel provider may offer a partial refund and the insurer will cover the rest.
But remember that every insurer has different terms and conditions - making it vital to read the small print on your cancellation travel insurance policy.
When will cancellation cover pay out?
There are certain circumstances where holiday insurance cancellation cover will pay out; these must be valid “unforeseen” circumstances that prevent you from taking the trip.
Typically, specific “perils” include illness, injury and being called for jury service - all of which are “evidence-based”. For example, as long as you did not know about the jury service at the time of booking your trip, or taking out insurance (whichever is later), you would be eligible to submit a claim.
Illness of a “close relative” may also count as a valid reason for cancellation, but you need to check the details. Other circumstances include natural disasters, hijacking, fire or flood at your house, and accident en route.
In each case, the insurer would seek relevant records for proof which would also show when something happened.
When will cancellation cover not pay out?
There are also certain situations where insurers will not pay out. These include running out of money, sickness or injury related to drug use, self-inflicted injuries, and contractual obligations.
If, for example, an urgent business appointment came up, that would not qualify for reimbursement; nor would changing your mind and deciding you no longer wanted to go away.
Equally, while the illness of a “close relative” should include a parent or sibling, you will usually find that grandparents, aunts or cousins are not included. Similarly, if a relative has an ongoing condition, this is likely to invalidate any claim.
Take out cancellation cover at the time of booking
Travel insurance is often a last-minute purchase, especially as buying it later can make it cheaper. However, if you book a holiday and then take out a travel insurance policy six months later, with the intention of cancelling the holiday, you risk invalidating the cover.
This is because you are purchasing the policy with a criminal or fraudulent intent, and as a result, wouldn't be covered. Equally, you wouldn't be able to take out insurance after being made redundant in order to cancel the holiday.
In every case, the insurer will need proof of when something happened - so it would soon become apparent if you were trying to play the system.
It is strongly advised that you take out cancellation cover at the time of booking the holiday so you are covered with immediate effect for all eventualities, including cancellation and delays, medical expenses and loss of luggage.
Make sure you shop around online for your travel insurance, comparing quotes to find the cheapest policy offering the right level of cancellation cover for you.
Steer clear of the very cheapest policies, as they may exclude cancellation cover altogether. Typically, you should look for a policy with £3,000 cancellation cover - or enough to cover the total cost of your holiday.