Destination danger: the uninsured who travel in hope

Many Brits will pay an arm and a leg if a trip goes bad – so don't scrimp on your policy, says Kate Hughes

Travel insurance is yet another in a long list of costs as we head overseas for a little rest and relaxation this summer, so it is tempting to give it a miss and keep the cash instead for a cocktail by the beach. In fact, this is just what one in seven UK tourists does when going abroad, reports market research company Defaqto.

But the cost of being uninsured can be huge if something goes wrong. According to the Foreign & Commonwealth Office, just two days in a hospital ward will cost you an average of around £1,600 in Mediterranean countries. For two days in intensive care, reckon on £5,000. Go further afield and the costs of not being covered can be even greater. In the US, for instance, suffer a broken bone and you can expect to pay between £20,000 and £30,000 to have it treated.

Put simply, travel insurance is essential, although it's important to shop around for the best deal. The cost will depend on: how long you want to be covered; your health or age; how many people you need to put on the policy; and your destination.

Defaqto estimates that the average cost of covering a single trip for one person travelling in Europe is around £16 for seven days and £20 for 17 days. A family of four will pay around £37 for a week and £50 for 17 days.

These figures double if you are going further – particularly to the US, due to the cost of American healthcare. However, if you are planning a lot of travel over the course of a year, an annual policy usually works out cheaper than buying separate cover for each visit. Multi-trip insurance for travel in Europe will cost a single person around £50, a couple £78, and a family £89. Worldwide annual cover, including trips to the US, adds between £20 and £30 to these figures.

Increasingly, banks are using free travel insurance to lure customers into migrating from a standard bank account to a fee-paying premium account. However, experts warn that these policies may not offer the same level of cover as stand-alone annual or single-trip policies. "These linked policies tend to be quite slim in what they offer," says Ian Durrell from the price-comparison service OnlyFinance.com. "They may not provide cover for very large personal liability claims, or they may have exclusions hidden in the small print."

He adds: "Anyone considering relying on this type of policy ought to check the terms and conditions and phone their provider before they go to make sure they are protected for what they plan to do. Don't just assume the policy will cover you."

That goes for older travellers too. Recently, mainstream travel insurers have woken up to the fact that retirees tend to have both the time and the inclination to get away – and that older doesn't necessarily mean frail. So although specialist companies such as Saga, Age Concern and Help the Aged may suit your needs, you can now shop around for better deals. And those people over 80 and 90 are more readily catered for than ever before.

However, be aware that pre-existing medical conditions may not be covered. "As you get older, the chances of ill-health or having a condition increase," says Mr Durrell. "Insurers will not want to be liable for this."

Researching premiums levied by different policies is the most straightforward route to cutting costs, although you should ensure you are comparing like with like in terms of what you are covered for. However, if you're looking to shave off a little more, the fine print could hold the key. The fundamental elements of all travel insurance policies deal with medical issues, baggage, personal liability (damage done by you) and cancellation. "Individuals should be insured for around £5m of medical cover," says Peter Gerrard, head of insurance research at price-comparison site Moneysupermarket.com. "And the personal liability section should insure you against damage of up to around £2m. Most policies cover these amounts, and while you probably won't need more, it's not a good idea to cut this down."

But equally, he adds, holidaymakers should beware of buying insurance they don't need. "If you are travelling with hand luggage only, you won't need thousands of pounds worth of cover that would normally pay for huge suitcases full of clothes." You should check to see if expensive items in your hand luggage are covered in your household contents insurance under the "away from home" section – particularly as many travel policies only cover individual items in your baggage up to between £100 and £150.

Mr Gerrard continues: "You don't need cancellation cover worth £5,000 if, for example, you are staying with friends and your only expenditure for the trip is £400 worth of flights. With flight operators financially stretched, however, it's important to check that your policy will cover you if the company goes bust in the run-up to your trip or while you are away."

If you are prepared to increase your personal excess – the amount you pay if things go wrong, before the insurance company takes over the expenses – you may also be able to bring down your premium. An excess of around £50 to £75 per person on a policy is usually plenty.

Elsewhere, the European Health Insurance Card ( www.ehic.co.uk) – the new version of the E111 form – pays for any medical attention you may need in parts of continental Europe. Some insurers will waive your excess if you have this card.

They missed the boat and their policy left them high and dry

Damien Elvin, 27, from London, was looking forward to the cruise of a lifetime with girlfriend Caroline when their connecting flight was delayed by 34 hours and the ship sailed without them. Damien (pictured, below left) thought his travel insurance policy, which came free with his Co-operative premium bank account, would cover the £1,400 cost of their missed holiday. He was wrong.

"We were due to fly back to the UK from a break in Cuba early one morning, with plenty of time before our cruise departed the next day. But the flight was delayed and we missed the boat. Being stuck in Cuba watching the hours slide by was like watching a car crash in slow motion. We rang the insurer from Cuba as soon as we realised we wouldn't make it in time. But we found out that because the holidays were separate bookings, we were not covered for a missed departure.

"The main reason I had this bank account, which cost me £10 a month, was the free travel cover. I'm usually really careful with insurance, looking for cover to suit my needs rather than just the cheapest option, but because this was a premium current account, I made the foolish assumption it would be a premium level of insurance. It is a classic case of getting what you pay for."