The cover means that any Saga customer taking out a new policy will be able to claim up to £10,000 per person insured if they need to cancel a holiday because they receive a positive Covid-19 test in the 14 days before their trip departure date.

Policyholders will also be able to claim on their insurance for the remaining value of their holiday if they contract Covid-19 while abroad and as a result they need to come home early.

Saga has included medical treatment abroad and repatriation costs for Covid-19 as standard on its policies since June.

The insurer says the changes have been introduced to provide customers with the confidence to travel in the coming weeks and months.

It is also in response to increasing customer demand – cancellation cover was named as the second most important thing companies could do to make people more comfortable about travelling abroad in a recent Saga survey.

Saga says it will review its policy terms as travel advice continues to change and the insurer will also introduce further elements of cover based on customer feedback.

Kevin McMullan, Saga Health and Travel Insurance head of product, said: “With travel restrictions continually changing, many people may be worried that much-anticipated holiday plans could be cut short, or increasingly reluctant to go at all. Now more than ever people need to feel confident and reassured when planning to travel overseas.

“Our new policy terms mean all new customers will be covered with up to £10,000 of cancellation cover should they fall ill with coronavirus in the 14 days before they depart. While they’re abroad they’ll also be covered for any medical costs as a result of Covid-19.

“We’re continuing to review and update our products to ensure they reflect the needs of our customers. However, we know the impact of coronavirus is far-reaching. We’d encourage customers to contact us directly if they’d like to discuss their individual circumstances and how we can best support them through these uncertain times.”

Rock Insurance Group launched a travel insurance policy that includes cancellation cover if the traveller tests positive for coronavirus last month. Allianz also covers epidemic and pandemic scenarios, including medical costs and cancellation cover.