Why you need to buy travel insurance before you go away

Booking your holiday months before you travel can be a great way of saving money, but unless you buy your travel insurance at the same time, you could end up undoing all your savings.

A common misconception is that travel insurance only covers you for lost luggage or broken bones when, actually, it can cover you for many more likely events such as cancellation because you’re sick, for example.

And while it's understandable to some degree that people are often put off buying insurance because of the cost, the money you save in the short term could end up being dwarfed by the cost and inconvenience of your holiday company going bust, or you falling ill and not being able to go.

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Why should I buy it now?

Tom Bishop, head of Direct Line travel insurance, says that by not covering yourself from the moment you buy your holiday, you could be left thousands of pounds out of pocket. "Often, people leave purchasing travel insurance until the last minute, but if something happens in the run-up to their holiday that causes them to cancel, they will not have any outlet to recoup their costs and may be left out of pocket," he explains.

"Losing out on your holiday is bad enough, but at least by taking out comprehensive travel insurance at the time of booking your trip, you won't lose out financially too." So consider the purchase of travel insurance as part of the holiday booking process, which isn't finished until you have bought cover, he advises.

Moreover, try to remember the main purpose of insurance is to protect you from the unexpected, and you cannot predict what is going to happen before you go on your trip. Bishop adds: "No one can predict when they might need to cancel their holiday or when a natural disaster may happen."

Illness and strikes/industrial action are just some of the things that can stop you from going on holiday, but your travel insurance should also offer cover for natural disasters and bad weather, such as snow. In 2010, thousands of travellers were left stranded or stuck at home when a volcanic ash cloud grounded flights across Europe and the Atlantic.

Your travel insurance should also cover you if the Foreign Office recommends against travelling to your destination. For example, in November 2012 the Foreign Office advised against all travel to the Philippines, after the devastation caused by Typhoon Haiyan.

Protection for all eventualities

You should also look for a travel insurance policy that will cover you for 'end supplier failure' - that is, if one of the companies you are travelling with goes bust, such as an airline, hotel or tour operator.

Bob Atkinson, travel expert at MoneySuperMarket.com, explains: "End supplier failure protects you against loss due to the collapse of a part of your holiday or the ability to re-book the failed element without incurring the additional costs, dependent on your policy." While it has been a few years since a major travel firm has gone bust, in 2008 the collapse of XL affected more than 200,000 holidaymakers, he says.

But while it's important to make sure you'll be covered if your trip is ruined by a third party, never overlook what your travel insurance policy will cover you for if anything goes wrong at your end – such as medical problems or the death or ill health of an immediate family member. Even a pet could cause you to cancel a trip if it develops a life-threatening condition and needs treatment. Not all medical conditions are included in every policy, so always check exactly what you're covered for.

You can also find cover that pays out should you be called up for jury duty or become unexpectedly unemployed. And don't forget to check what the limit of your cancellation cover is. Atkinson says: "Cancellation cover needs to be equal to or greater than the cost of the holiday and, if taking a cruise, ensure the policy covers for this as many require a supplement."

Am I covered by my bank account?

Many bank packaged account customers have travel insurance included as an extra, but it's not always clear how much cover these policies provide. Atkinson explains: "It's vital not to assume this is sufficient for you as it often does not cover trips outside Europe, winter sports trips or even some trips of more than two weeks."

If your account does not offer the cover you need, upgrade the travel insurance element or look for a new standalone policy. If you do go down that route, shop around and compare policies on comparison sites, but remember that not all firms are on them, such as Aviva – which offers up to 20% off travel insurance policies when you buy online - and Direct Line. So do your own research as well.