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Does your travel insurance cover travel disruption?

Mon 9th Oct 17

At Ryan's our travel policies can include travel disruption, sometimes for only just a few pounds. We strongly encourage our customers to take this option and especially now in light of current events.

Others however will not be so lucky as James Connington from The Telegraph explains...

The Ryanair debacle and now the collapse of airline and holiday operator Monarch, have highlighted the jigsaw nature of compensation and refunds that apply when flights and holidays fail to materialise.

Swathes of customers of both firms will be heading to their insurers to lodge a claim, but many will be disappointed. A poll of policyholders recently found seven in 10 believed their insurer would pay for hotels and the rebooking of flights if their flights were cancelled. In most cases they won't.

What exactly IS covered by insurance when a company fails?

When a company that cancels hundreds of thousands of flights remains in business, the law can force compensation in a number of ways (see below). But these laws don't apply when an airline has collapsed.

Customers may have recourse via their credit card company, debit card provider or travel agent but if none of those avenues is available, it is left up to your insurer.

Two specific forms of protection are included within some travel insurance policies for this situation. Without either, the policies are unlikely to pay out.

The first is "scheduled airline failure insurance" or "Safi". This will cover any costs incurred if the airline folds, including if that happens while you are abroad.

A policy could also include cover for "supplier failure". This covers the cost if your airline, hotel or any other provider goes bust - either to replace that element of your trip, or to refund you if the trip is no longer possible. This is generally more valuable, as it covers a wider range of possibilities.

Brian Brown of insurance analyst Defaqto reckons two in five travel insurance policies won't cover travellers caught out by Monarch's collapse. Cheaper policies in particular are less likely to include these elements of cover.

Telegraph Money searched for policies to cover a family of four on a one-week trip to Europe in November via a major comparison website. The cheapest policy, costing £11.93, did not include either Safi or supplier failure. Out of the 10 cheapest policies, five had Safi cover of £1,500, and none had end supplier failure cover.

That would leave customers of five policies unable to claim back their money for a cancelled Monarch flight on their insurance. None would be able to claim money from their insurer if another provider involved in their holiday, such as a hotel chain, were to go bust.

You do not have to spend too much more for a policy that has both Safi and supplier failure covered. For the same scenario as above, the cheapest policy with both protections in place is £16.78, just £5 more than the cheapest option. If you already have cover that doesn't include the protection, you can buy a stand-alone policy to cover your trip.

The number of policies that don't cover travellers in the event of an airline going bust could, in theory, have left a large number of the 100,000 Monarch customers already abroad to fend for themselves.

Stephanie Corbett, of comparison site comparethemarket.com, said: "There is a grey area of accountability between insurers and the airline when a firm collapses. The CAA needs to work on this, to avoid any repeat of today's massive repatriation."

In this case, the government has instructed the Civil Aviation Authority to charter a fleet of planes to transport all Monarch customers currently abroad back home.

Protection if the airline cancels your flight

When an airline cancels flights - as Ryanair has done with hundreds of thousands of seats - and is still operating as a business, your recourse is generally through the airline, rather than your insurer.

The "cancellation cover" clause you see in a policy is intended for circumstances where you are unable to make a flight - such as illness, injury, or some other kind of emergency. It is not about flights being cancelled by the airline.

The law entitles you to a full refund or alternative flight from the airline if you booked an EU-regulated flight. Expenses such as staying at an airport hotel or food while waiting are also covered.

But the legislation doesn't automatically cover costs for hotels or anything else that has already been paid for as part of a holiday. There is a compensation scheme if you are given less than two weeks' notice of a cancellation, paying between £110 and £550 per person, depending on the distances involved.

Mr Brown explained: "As you can still claim compensation from Ryanair, I don't know any insurers who will pay out, even if you have losses over and above the compensation cap."

Bear in mind, that paying for everything on a credit or debit card, does not automatically mean everything is eligible to be claimed on.

Mr Brown explained that just because a flight has been cancelled, that doesn't mean that you can make a section 75 or chargeback claim for your hotel booking.

"The hotel hasn't denied you the service that you paid for. As far as they're concerned, they haven't done anything wrong," he said.

His recommendation is to book cancellable hotels and pay with a credit card to avoid being caught out. If you book via a credit card, and your total spend was over £100, you can make a claim via your credit card company, which under law has a joint liability with the holiday firm involved.

Those who booked a holiday via an Air Travel Organisers' Licensing (ATOL) agent should be able to claim a full refund via their agent.

Those who paid via a debit card might be able to make a chargeback claim. This isn't a legal right, but an agreement card companies such as Visa and Mastercard have signed up to. There are time limits involved.