Consumers confused by Holiday Protection, ATOL and Travel Insurance

By , March 15, 2012 5:48 pm
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A survey has shown that consumers don’t understand if or how their holidays are protected against insolvency.

When you book a holiday it could be protected against insolvency by the ATOL Scheme, by credit card if you used it to book the holiday, by your travel insurance or not protected at all.

travel insurance

Travel insurance can provide insolvency cover

It’s important to know how your holiday is protected against insolvency, if you don’t know you could find yourself losing out if your holiday supplier stops trading and doesn’t fulfil your booking.

The survey conducted by Explore Research on behalf of Travel Weekly highlighted the amount of confusion which exists with regards to financial protection, holidays and travel insurance. Despite the fact that most respondents thought financial protection was important, few understood if or how their holiday was protected in the event of supplier insolvency.

The survey showed that 96% of UK adults considered financial protection ‘extremely important’ or ‘very important’ when booking an overseas holiday, yet only 52% actively considered what financial protection would be in place for their holiday when they made a booking.

When asked how they thought holidays were protected against insolvency, 70% said by travel insurance and only 42% mentioned ATOL.

This figure highlights the confusion that exists with regards to financial protection for holidays and how consumer’s money could be at risk because of it.

70% of people surveyed thought that travel insurance would provide cover in the event of insolvency, and although it is possible it is not always the case and travellers should check whether their travel insurance provides cover for insolvency before relying on it.

Traditionally travel insurance did not provide cover for insolvency because the majority of holidays were booked as a package via an ATOL bonded tour operator. This meant that holidays were ATOL Protected and the CAA (Civil Aviation Authority) would ensure that holiday makers could claim their money back, or get home safely in the event of insolvency.  So there was no need for travel insurance to provide cover for the insolvency of a holiday supplier.

Of course, these days, with low cost airlines and the internet, the way we book our holidays has changed dramatically and a large percentage of holidays booked are not protected by ATOL or the CAA.

Travel insurance can and does provide cover for insolvency, often called Scheduled Airline Failure or Dynamic Packaging cover, but you need to check. Some travel insurance policies include it as standard, some travel insurance policies have the option of adding insolvency cover at an additional price and some travel insurance policies don’t offer insolvency cover at all.

The lesson is; if you are not booking an ATOL bonded holiday, don’t just assume that your travel insurance will provide cover for insolvency, spend a bit of time choosing your travel insurance and buy a travel insurance policy that can provide the extra insolvency protection you need.

Which holidays are ATOL bonded?

The level of financial protection you have for your holiday if a supplier becomes insolvent depends largely on how you booked it, which in turn means that how you booked your holiday will also have an impact on what level of travel insurance cover you should buy. Travel insurance cover for insolvency can be called a number of different things, from something simple like ‘Insolvency Cover’ to ‘Scheduled Airline Failure’, which isn’t usually limited to the insolvency of airlines as the name suggests, or Dynamic Packaging Cover which probably means very little to anyone outside of the insurance or travel industry.

Quick check diagram - do you need insolvency cover with your travel insurance?

At the moment, the basic rule is, if your holiday was sold as a package including flights, advertised at one inclusive price then it should be ATOL Protected, if you have booked or chosen elements of your holiday separately, even if they were booked through the same company they are unlikely to be protected by ATOL and you should make sure your travel insurance provides cover for insolvency.

Find out whether your holiday is protected >>

The Government is changing ATOL to protect more holidays, read our post to find
out how the rules are changing and which holidays will remain unprotected


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