Holiday Protection Insurance

With the collapse of several travel firms - and the misery and disruption that followed - still fresh in people's minds, holidaymakers are understandably worried about the state of the travel industry.

Holidays4U, Aegean Flights, Goldtrail, Kiss Flights and XL Airways have all gone under in recent years, and even Thomas Cook, one of the biggest and best-known operators ran into difficulties in November 2011 - sending shockwaves through the sector, as many thought that only small firms were vulnerable.

All of this demonstrates that in these uncertain economic times, travellers are right to be worried about the financial health of travel companies.

If you spend your hard-earned cash on a longed-for holiday, you may well have fears about putting money at risk and missing out on a well-deserved break should a travel firm go bust.

You may also be concerned about being stranded overseas if a company fails when you are abroad, leaving you to have to fork out again for a hotel room and for new flights to get back home.

The good news is, there are steps you can take ensure you aren't stranded or left out of pocket; the key is understanding exactly when you are protected, and when you're not.

What is holiday protection insurance?

Travellers need to think about different types of holiday protection insurance to safeguard their travel plans.

First off, you should check the holiday you are booking is fully bonded by one of the two main UK travel bonding schemes: ATOL (Air Travel Organisers' Licensing) or ABTA (Association of British Travel Agents).

Secondly, you should take out travel insurance which includes cover for “supplier failure” as well as “scheduled airline failure insurance” (SAFI).

Thirdly, you should pay for your holiday using a credit card or Visa debit card, as this will give you added protection.

ATOL

When thinking about holiday protection, a lot rests on whether or not you are booking a package holiday; this is defined as a trip including flights, accommodation and other components sold for one price by one supplier, such as a travel agent or website.

By law, any company selling package holidays that include air travel must guarantee total financial protection via the ATOL bond system, which pays out in the event of the supplier going bust.

If the worst should happen before you travel, and you've paid just the deposit, you should get this back in full.

Similarly, if you've paid for the holiday in its entirety (as you are usually required to do eight weeks before departure), you should be entitled to a full refund through ATOL, and once you've received this, you can then book a new holiday.

With this cover, even if the company goes bust while you are away, you should be flown home at no cost to you. Note however, that it does not help with delayed or cancelled flights, and does not protect holidays where there is no air travel, such as a cruise or rail holiday.

ABTA

ABTA represents more than 5,000 travel agents and more than 900 tour operators, and while it is not essential for firms to belong to the ABTA, there are advantages for holidaymakers if your operator is a member.

Members of ABTA sign up to a code of conduct that sets out how they will deal with any complaint, and this dispute reconciliation service could serve as a useful fall-back should anything go wrong with your holiday.

As with ATOL, ABTA is there to help if your travel agent fails, or if the holiday goes wrong. However, it does not offer financial protection for holidays that involve travel by air.

Do you need holiday protection?

With much confusion persisting over what actually defines a “package” holiday, it is vital not to assume you are automatically protected.

Before booking a package deal, check the tour operator or travel agent is signed up to one of these schemes. Look for the ATOL or ABTA logo, and if you're booking online, read the small print before you buy.

If you want complete protection from ATOL, make sure the firm states all parts of your holiday are covered on its booking confirmation.

Further, as there have been cases of firms falsely claiming to be ATOL-bonded, you can't take the logo as sufficient proof; cover must be spelt out within the full confirmation document.

You can check the name and licence number at atol.org.uk.

If you do get a refund on your holiday, don't expect the money to be credited to your account straight away, as it may take months for the money to be processed.

Holiday Protection for Independent travellers

While this protection works well for those who book a package holiday, more and more holidaymakers are now turning their backs on this kind of holiday and booking their trips independently. But crucially, if you book your flights, accommodation and other services, such as car hire, separately, you don't have the same protection - so cannot rely on the ATOL and ABTA schemes. For example, if a travel agent sells you flights from one company and accommodation from another and then goes into receivership, its ATOL bond will only cover the cost of your flights.

If you make individual arrangements, it is crucial to take out a comprehensive travel insurance policy.

When do you need separate holiday protection?

Holiday protection insurance can prove vital for independent travellers as they can find themselves out of pocket if one part of the deal falls down. That said, don't assume that all “standard” travel insurance policies will pay out if a travel company goes bust, as most only offer limited cover for financial failure of travel agents, tour operators or airlines, and some offer none at all.

Generally speaking, travel policies focus on covering medical emergencies, along with limited cover for stolen baggage and cancellation of trips.

To be on the safe side, look for a premium policy offering “scheduled airline financial insurance” - known as SAFI, as this will pay out if the airline goes bust. Also look out for cover including “end supplier failure” as this will cover you should other firms, such as car insurance, or hotel companies go bust.

There are now a number of “independent traveller” policies offered by insurers such as Axa and Marks & Spencer, and these offer more comprehensive cover for those booking each element of their trip separately.

SAFI can also be bought as stand-alone cover from MoneySupermarket for a reasonable price, and will cover costs if an airline or agent goes into administration.

AITO

Members of the Association of Independent Tour Operators (AITO) are required to arrange financial protection for all holidays and other arrangements (including accommodation-only), if a holidaymakers books with the member under the AITO logo.

This financial protection applies to travellers who are resident in the UK at the time of booking, and to most overseas customers who have booked directly with the member. 

Members are required to submit details of their financial protection arrangements to AITO on a regular basis.

TTA

If your holiday arrangements does not involve a flight, which means you are not protected by ATOL, a tour operator can use an insurance policy or a deposit scheme instead to ensure the money it receives is protected.

The Travel Trust Association (TTA) is a long-established and respected trade body which operates one of these schemes.

When you pay for your holiday, your money will be deposited into a trust account, supervised by an independent trustee, and will usually stay in this account until you return from holiday.

If a TTA company collapses, you will either get all your money refunded or arrangements will be put in place to enable your holiday to continue as planned. For more information go to traveltrust.co.uk.

Passenger Shipping Association

At present, five ferry lines and 11 cruise lines are bonded with the PSA. 

This means that if you have booked a cruise-only or a ferry package holiday with a bonded member, you money is protected should the company fail for any reason. 

This includes any deposit paid to the cruise line or ferry company for an outstanding trip, as well as the expense of repatriating customers back to the UK if the company goes into administration mid-holiday. 

It also covers package holidays operated by ferry companies, but not A-to-B crossings.

Credit card holiday protection

A simple way to get a little extra protection is by booking your holiday using a credit card or Visa debit card. 

By booking flights, accommodation or a package deal that cost between £100 and £30,000 on your credit card, you get protection under Section 75 of the Consumer Credit Act, which means your card provider is jointly liable with the retailer, and must refund you. 

Similar protection is offered on Visa debit cards through the Visa chargeback scheme. 

In the current economic climate, this is vital protection, as it means the card provider will pay out if a firm goes bust or cancels your holiday.

Changes to holiday protection cover offered to consumers

The Government does have plans to boost the cover offered to travellers, and these proposals are due to come into effect at the beginning of 2012. 

Under these changes, proposed by the Civil Aviation Authority (CAA), more people should be protected through ATOL. 

This is because the number of trips that will count as packages will increase - such as those sold by online travel agents - and so be covered under the ATOL rules. Under the changes, it should also be clearer to travellers when they are covered, as they will receive a certificate. 

However, there will still be no automatic protection for passengers on scheduled flights - so you still risk losing your money if the airline goes bust.

 

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