If an airline goes bankrupt before or during your holiday, it could be curtains for your holiday plans. Given that airlines are going bust on what now seems like a weekly basis, it is prudent to make sure that you have some protection in the form of financial default insurance.
A travel insurance policy which includes financial default cover will only pay out if an airline has completely ceased all operations due to bankruptcy proceedings. There may be a number of conditions attached to this type of cover, so it is important to make sure that you know what you are getting into.
It is worth investigating the small print of your travel insurance policy before you buy, as some of the more stripped down packages do not offer financial default cover as standard. Also, steer clear of buying insurance directly from the airline you are travelling with, as they cannot pay out on a claim if they are bankrupt themselves.
This type of cover will not protect you if your travel agency goes under, as travel insurance policies usually specify that financial default coverage only applies to travel suppliers, such as tour operators, airlines, and cruise lines, and not to the company that sold you your travel insurance.
Some package holidays use a combination of different travel suppliers, which can complicate the issue. Most financial default policies will only pay out if you have to miss your whole trip as a result of the bankruptcy of a travel supplier, so if you are flying out to the Caribbean to catch a cruise liner, and the airline that is taking you out there goes under, causing you to literally miss the boat, then you will be entitled to full compensation.
In order to prevent a rush of insurance orders following the announcement that a travel supplier is in financial difficulties, there is usually a waiting period written into the insurance policy. This can range from a few days to a few weeks between buying a policy and the travel supplier declaring bankruptcy.
Most insurance underwriters have a list of airlines that they are willing to insure, so make sure that the airline that you are travelling with is on this list before you buy any policy, or else your financial default cover will be worthless.
To sum up, make sure you get your travel insurance sorted as swiftly as possible after you have booked your trip, check the small print, and make sure that you do not buy insurance directly from your airline or travel agent.
1stoptravelinsurance.co.uk provides cheap annual travel insurance with cover to travel as many times as you like for up to 45 days at a time.