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‘Worrying’ lack of cover despite new package holiday regulations

Paloma Kubiak
Written By:
Paloma Kubiak

Holidaymakers will be afforded greater protection when booking DIY trips but there is a serious limitation to the directive.

Currently, when you buy a package holiday including flight and accommodation from a travel agent, if the airline or hotel provider were to go bust, you’d get a full refund or return travel home to the UK.

The new EU Package Travel Directive has been designed to give travellers more protection against a firm going bust, namely for those who book travel outside of a traditional package holiday.

From 1 July, the protection will be extended to customers who buy travel services such as flights and accommodation from a single website, call centre or agent which ‘packages’ up the different products and services from different suppliers.

But according to financial information business Defaqto, people booking different elements of their holiday via different portals won’t be protected if the worst were to happen.

As such, Defaqto said that travel insurance cover is absolutely vital, but it’s essential holidaymakers book the right policy.

It analysed nearly 1,000 travel insurance policies on the market and found that 41% do not include cover for scheduled airline failure and 14% of single trip policies and 7% of annual policies offer this as an optional extra.

After flights, accommodation is usually the next big concern as many require you to pay upfront. But, anything that’s booked directly, such as a safari or diving course, isn’t covered under the regulations. This means if the provider were to go bust, the holidaymaker would be left to foot the bill.

While airline failure is rarer, it’s not uncommon for a tourism company to go out of business, according to Defaqto. It found that only some travel insurers provide cover for this under the ‘financial failure’ section of a policy.

Brian Brown, head of insight at Defaqto, said: “The way we travel has fundamentally changed, with people now taking more control of their holidays and booking directly. The new EU ruling is good news for those who book all of the elements of a trip through the same website or agent as they will get the same protection as with a package holiday. However, this still leaves a large number of holidaymakers without protection if they book any elements separately, which they are often likely to do.

“If you are booking any elements of your holiday directly or through different agents or websites, then look for travel insurance that includes ‘financial failure’ cover. This cover is similar to airline failure cover but for the non-flight elements, such as accommodation and excursions and is designed to cover independent travellers. You should also always pay with a credit card if possible for additional protection.”