The guidance on this site is based on our own analysis and is meant to help you identify options and narrow down your choices. We do not advise or tell you which product to buy; undertake your own due diligence before entering into any agreement. Read our full disclosure here.

How Does Travel Insurance Work?

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Travel insurance protects against unexpected and unfortunate costs that might occur while you’re on holiday, such as cancelled flights, theft of your property, illness, injury or needing to cancel or cut short your trip due to an emergency.

There is a great deal of variability in terms of travel insurance features and coverage. It really pays to think about which features you need, and which you don’t, so that you have ample coverage but don’t overpay. We explain the nuances of travel insurance coverage below.

What Does Travel Insurance Cover?

Most travel insurance policies cover some level of cost that you may incur with these general, unexpected events:

What’s Included in Most Travel Insurance?

  • Cancellation of trip (requires a valid reason such as a medical emergency)
  • Loss, theft or damage of personal belongings (e.g., baggage)
  • Flight delay/cancellation (although not when it's the airline's fault - then the airline is responsible for compensation through EU 261)
  • Medical treatment (due to illness or injury, although injury due to skiing and other extreme sports is usually extra)

Note, in situations where your medical treatment can be handled by a state-run medical facility, most travel insurance companies will expect you to seek treatment there and have the costs covered by your EHIC or GHIC. GHIC is the post-Brexit EHIC replacement—it stands for UK Global Health Insurance Card and is expected to operate similarly to the EHIC, except that it won't cover you in Norway, Iceland, Liechtenstein or Switzerland.

Trip Cancellation or Disruption

Travel insurance may cover your prepaid, nonrefundable travel and accommodation expenses (e.g., flights, hotels, airbnb, etc.) in the event your trip is canceled or cut short—up to a limit.

Cancellation can take two forms: if you need to cancel or if, say, your flight in canceled by the airline. In the first case, travel insurance will usually cover your trip expenses if you have to cancel due to illness or injury (e.g., to you, your travel partner, a close relative, the person with whom you are visiting, etc.). For further details read more in our article What Is and Isn't Covered under Cancellation Cover.

Travel insurance may also pay when flights are canceled due to adverse weather. Trip expenses may include travel, accommodation, excursions, activities, etc. The level of cover and excess will depend on your individual policy.

On the other hand, if your flight is canceled by the airline, for instance, travel insurance may or may not kick in. You'll notice that most fine print in travel insurance policies states that they may only cover for canceled, pre-booked transport for which you cannot be reimbursed elsewhere. In cases like these (e.g., Ryanair's thousands of canceled flights in Autumn 2017), travel insurance probably won't reimburse you for your flights. In that case you must rely on compensation through regulation EU 261, which you must pursue directly with the airline.

Scheduled Airline Failure Insurance (SAFI)

Many travel insurance policies do not cover the event of an airline going bust. If this happens, you may be out of pocket for the cost of any upcoming flights, accommodation, etc. There are a few ways to protect yourself against an airline going bust:

  • But an ATOL-protected package holiday
  • Pay with a Credit Card (for protection under Section 75 of the Consumer Credit Act 1974)
  • Buy SAFI insurance

SAFI insurance is not included in many travel insurance policies. If you're looking for it specifically, you may need to pay up for an insurer's top-end policy. Read the fine print to be sure of what you're buying. Also be aware that you may need to purchase flights directly from the airline in order for any SAFI insurance to kick in. For further information read our article, SAFI, End Supplier Failure and Travel Insolvency Cover Explained.

Personal Belongings & Baggage

In the event that your bags or other personal effects are lost, stolen or damaged, you will be covered up to your policy's limit. Usually, the insurance company will take into account wear and tear, so you may be compensated for less than the item's original values.

This section of cover on a travel insurance policy might also compensate you for delayed luggage so that you can buy essentials to carry you over, while waiting for your bags to arrive. The limits on this feature might be in the range of £75 - £300 per person, depending on your level of cover.

Flight Delays

If your flight is delayed, you may receive payment for meals, drinks (non alcoholic), phone calls, etc. Like flight cancellations, whether you are reimbursed for a delay by the airline or your travel insurance will depend upon the reason for the delay. If the delay is the airline's fault (not weather or air traffic control) then you should receive reasonable reimbursement for these basic needs from the airline. Ask customer service associates about this at the airport—they may provide a voucher on the spot.

In other cases, you may be able to claim for meals, phone calls, etc. through your travel insurance. Don't expect lavish meals at the expense of your travel insurance company. You will be limited, for instance to £25 for a twelve-hour delay. Considering lofty airport prices, this payment may not go far.

Medical Treatment

Cover for emergency medical treatment can be the most valuable component of a travel insurance policy. Medical expenses in many parts of the world can be astronomical, potentially leading to financially devastating bills if you are injured or become ill while abroad. Be sure you are comfortable with the excess on a policy before you take it out.

Extras

Common extras, which are not included in standard travel insurance policies, include winter sports (e.g., skiing), cruises and golf clubs. You can earn more about the average costs of these add-ons here.

Excess

Travel insurance policies come with an excess, which is the amount which is deducted from any claims that are paid out. How much is the excess? It varies by insurer and also by the type of claim. For instance, you might pay no excess on for a medical emergency but pay a £100 excess on lost baggage. Travel insurance plans bought from a comparison site tend to have a higher excess than plans bought direct from a travel insurance provider—part of the way an insurer can offer lower prices on a comparison site.

Finding the Best Travel Insurance

The cost of travel insurance depends upon a number of factors, primarily the excesses (£), coverage limits (£) and extras (e.g., winter sports). Before shopping around for travel insurance, think carefully about how much you can pay out of pocket in the event of a claim (excess), the value of your trips and belongings (coverage limits) and whether or not you need any special cover.

Annual or Single Trip?

In most cases, if you travel only once a year you are better off buying single trip insurance. However if you travel 2 or more times a year, you'll usually save money buying an annual policy—in addition to saving money, you won't have the hassle of buying multiple policies each year. Read more about in our article should you buy annual or single trip travel insurance?

FAQs

An annual travel insurance policy covers multiple trips during the year that your policy is valid, as long as those trips are to locations covered by the policy. Annual travel insurance can be bought to cover certain countries or regions (e.g., Europe, Worldwide, or Worldwide excluding the USA, Mexico and Canada).

The best time to buy travel insurance is as soon as you book a holiday. This ensures you have the protection of the cancellation section of cover. For example, consider the situation where you book a trip in December to travel in July, but then in May you have a severe illness that leaves you unable to take your holiday. If you had purchased travel insurance in December when you bought the trip, you'd be covered for cancellation. But if you were waiting until just before the trip to buy travel insurance, you would not be covered for the illness that occurred in May and would be out of pocket for the cost to cancel your trip. We discuss this further with more examples here.

If you're trying to decide whether or not you need travel insurance, read our article about this topic here—it explains how to check if you already have cover elsewhere (e.g., through your bank) and some key questions to ask yourself such as the value of your trip.

Comments

The guidance on this site is based on our own analysis and is meant to help you identify options and narrow down your choices. We do not advise or tell you which product to buy; undertake your own due diligence before entering into any agreement. Read our full disclosure here.