Why It Pays to Spend A Little More on Your Holiday Insurance

With a much-publicised cost of living crisis looming, most of us are looking for ways to cut down on our spending at the moment. But one expense that appears to be defying the trend might come as a surprise.

After decades of being treated as something of an annoyance by most holiday makers, and certainly something to spend the least amount possible on, latest figures suggest that people are spending more on travel insurance

Analysis by price comparison site MoneySuperMarket.com, which is a major channel for travel insurance sales in the UK, shows that the proportion of travellers buying budget cover is down compared to before the COVID-19 pandemic, while interest in more comprehensive policies is up.

Indeed, in 2019, policies rated by the site in the cheapest ‘bronze’ tier were by a distance the most popular travel insurance policies bought through the site, accounting for 40% of all sales. 

Airport

But that has now fallen back to 35%, meaning the cheapest policies have now been overtaken by sales of mid-tier ‘silver’ policies, which have gone up from 35% of sales pre-pandemic to 38%.

Sales of the most expensive ‘gold’ tier policies are also up, from 26% in 2019 to 28%.

Worth it?

So what exactly do you get for spending more on your holiday insurance? And why the change in attitude among consumers?

Plane

In the past, quiz any random sample of travellers about their insurance purchases, and you could almost guarantee being able to file the responses in three categories – those who very much welcome the protection offered by a travel policy and are more than happy to pay for it, those who begrudgingly point out they never have to make a claim and therefore spend as little as possible on insurance, and those who don’t bother with insurance at all.

Now it seems that more and more people are falling in the first group. And we can put that directly down to the pandemic.

It’s true that, for a majority of people heading abroad before COVID hit, the idea of needing to make a claim against your travel insurance seemed very remote indeed. You might get unlucky and lose your luggage en route. Of greater concern was having an accident or falling seriously ill and getting charged for treatment in a hospital, which can cost thousands. 

But pre-pandemic, more than a quarter of Brits heading abroad said this was a risk they were willing to take – despite the average budget insurance policy costing just £9.40.

COVID-19 has shifted attitudes to risk. It perhaps started with the heightened awareness of risk posed by COVID itself. When international travel was allowed, those heading abroad no doubt had more of a fear of falling ill overseas than they did previously, and were prepared to pay for more comprehensive cover accordingly.

Another big influencing factor was no doubt how common trip cancellations became during the pandemic. For a period of 12 months or so, everyone travelling pretty much anywhere in the world had to take a COVID test before they set off. If the test turned out positive, that was it. Trip cancelled. 

Travel insurance was the only way to guarantee claiming your money back.

The inflated risk of cancellations has, of course, carried over into 2022, after the easing of most travel restrictions. The much-publicised disruption caused by staff shortages in the aviation industry is just one more reason why people are prioritising insurance when they head away now.

Virgin Atlantic

What do you get for paying more?

Travel insurance policies cover the same core things however much you pay for them. Whether you go for the cheapest cover you can find or splash out on the most comprehensive policy, it will include cancellations (which usually also includes delays and having to cut a trip short), medical cover, personal baggage and lost/stolen money and passports.

The difference comes with the payout limits. This isn’t such an issue with medical cover. Even the cheapest policies tend to offer seven-figure medical cost protection, to cover the worst case scenario of a severe injury or illness that requires lengthy hospital treatment followed by medical repatriation. More comprehensive policies will offer unlimited medical payouts. But this is really the baseline of what holiday insurance covers you for, so all policies are pretty generous in their payouts.

Things are different with cancellation cover. The cheapest deals might offer a maximum £1000 pay out at best. That might be fine if you are a single person heading on a city break with a budget airline and cheap digs. But it’s unlikely to cover the cost of a family package holiday if that gets cancelled. With a mid-tier policy, you can expect to get cancellation cover of around £5,000, while the most deluxe policies might go to anything between £7.500 and £10,000.

One final point is that cheaper policies tend to have higher excesses, or the amount you have to pay towards any claim. The most comprehensive policies will often charge no excess at all. This makes a big difference to the level of financial protection a travel policy gives you. With the cheapest cover, you know it will always cost you even if you make a claim – and given the typical size of excesses, that will probably mean having to pay upwards of £100 per claim.

The most comprehensive policies might be more expensive up front. But having no excess means you will save a lot more if you do end up having to make a claim.

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