In the first half of a two-part feature, Ian Jerrum provides an introduction to travel insurance and reviews the scope of cover offered by standard UK travel policies
Travel insurance protects policyholders against costs arising from incidents affecting their trip, whether on their journey or prior to departure. Most travel policies are sold through travel agents, insurance providers, banks, building societies or supermarkets.
The are mainly sold to cover leisure travel, but cover is also available for business travel. Policies may be in force for a day trip or for as long as an annual. For frequent travellers they may also cover many trips, where policy limits, conditions and exclusions will apply for each trip.
A standard travel insurance policy would normally include cover for cancellation and curtailment, personal accident, medical expenses, baggage, personal effects and money, travel delay, missed departure, personal liability, loss of passport and hijack. Cover extensions are also available to protect against the collapse of a tour operator and to cover legal expenses.
Travellers who are forced to cancel or cut short their trip may forfeit a deposit paid at the time of booking, be liable for the full cost of the trip, or incur additional travel costs in returning sooner than planned. Such costs will only be covered where the change of plan is genuinely unavoidable.
This might be due, for example to: death, illness or injury of the policyholder, a traveling companion, or close relative or business associate.
Other valid reasons for a change of plan would include the policyholder unexpectedly being made redundant after booking the trip, being called up for jury service or as a witness in a court case, or where a serious loss, such as fire or theft, occurs at their home or place of work.
Some policies also pay a small sum where departure is delayed beyond a stipulated period of time, say 12 hours, due to bad weather or perhaps industrial action.
Under the heading of personal accident, travel policies often include cover for accidental injury resulting in death, loss of limb(s), loss of sight or permanent total disablement.
Medical expenses are generally regarded as the most valuable aspect of a travel insurance policy. Medical treatment overseas can prove very expensive, especially in countries like the US where there is no public health service.
Travel policies normally protect policyholders against hospital and other medical expenses, additional accommodation, and/or travel expenses (potentially extending to the cost of flying out a relative where the patient was traveling alone), as well as repatriation costs for the policyholder and their companion(s) or medical attendants.
Return travel costs will sometimes be included for uninjured travellers forced to return home when a relative or close business associate dies or suffers serious illness or injury.
Hospital benefit - a cash benefit intended to cover an in-patient's out of pocket expenses during a short stay in hospital - may also be included.
Cover is also typically provided for accidental loss or theft of, or damage to, the policyholder's belongings - either those they take with them or those purchased during the trip. This is usually subject to an overall limit, for example, £1,500.
There is often a limit per item of say £250, and is normally provided on an indemnity basis. For example, a deduction will be made for wear and tear. Some policies, however, now provide cover on a new-for-old basis.
Policies also often include an amount payable (say, £150) for replacement of necessities in the case of temporary loss of baggage in transit beyond a specified number of hours, for example 12. Currency, travellers cheques and tickets are normally covered up to a limit of say £500.
If a traveller misses a connection and incurs additional travel or accommodation costs as a result, a travel insurance policy will normally respond (up to a limit of say £600 per person) provided this is due to mechanical breakdown, accident, or serious problems with public transport, rather than any fault on the part of the policyholder.
If a return trip is delayed beyond say 12 hours due to mechanical breakdown, adverse weather conditions or industrial action, the policy will normally pay a small amount, such as £20 per 12 hours, up to a maximum of £200, to cover additional costs incurred.
Personal liability is another important area of cover since individuals traveling overseas can be held legally liable for bodily injury caused to other people or for damage caused to their property.
If a claim is made while the policyholder is on holiday within the UK, a household contents policy will normally provide cover.
Personal liability cover under a travel policy covers the cost of defending a claim (including legal expenses) and damages payable up to a limit of say £1m or £2m.
Policyholders have an obligation to notify the insurance provider immediately of any incident likely to result in a claim, so as to ensure investigations can be begun immediately and the defendant's position will not be adversely affected by any delay.
In the second part of this feature we will consider some additional aspects of standard cover (such as loss of passport and hijack) and extensions to protect against eventualities such as the collapse of a tour operator or legal expenses incurred, or to cover involvement in winter sports. We will also review typical conditions and exclusions, and look at the overlap between household and travel insurance policies. IT
Ian Jerrum is managing director of Searchlight Solutions, the only training provider accredited by the Skills Council
This feature is based on materials available on Searchlight's e-learning system, Tick