Insurers in uncharted territory on terrorism

Sam Dunn asks how much cover holidaymakers can expect if they're caught up in an atrocity abroad

Tourism and terrorism came together again in Bali last weekend, reminding holidaymakers of yet another consideration when they're planning a trip abroad.

Being caught up in an atrocity is a draining enough ordeal yet the dangers also focus attention on exactly how much protection is provided by a travel insurance policy.

Unfortunately, as insurers grapple with the costs and implications of terrorism, consumers are in danger of being left in the dark - and at risk of having no protection.

While one policy may pay out for hospital medical expenses if you're injured in a bomb explosion at a resort, another will only do so provided you're not in a country listed on the Foreign & Commonwealth Office (FCO) website as "high risk".

"There's no common theme with terrorism cover - every insurer will have a different view," says a spokeswoman for industry body the Association of British Insurers (ABI).

The companies are taking different commercial decisions about funding terrorism cover for travellers, she adds, and that's why the policies are diverse. But neither can you be sure where you stand with just one insurer. For example, many policies say they won't cover claims arising from a terrorist attack, only to add that, on a case-by-case basis, they will consider policyholders' medical costs and repatriation in the event of an incident.

"Insurers are not sure yet how to [price] the cost of terrorism into premiums; they don't have much experience of [claims]," says Richard Mason of the price-comparison website insuresupermarket.com.

Basically, it's down to you to check exactly what you're covered for with the insurer.

For example, say you were unlucky enough to be injured in a terrorist bomb blast overseas and needed hospital treatment and to be flown home.

Norwich Union says it will pay for such costs no matter where you are on holiday.

So if you were injured in high-risk areas of Israel, Indonesia, the Philippines or even India - all on the FCO's "advise against all travel to parts of the following countries" list - then Norwich Union would pay out up to £10m in medical, surgical and repatriation expenses.

However, neither the Halifax nor the Post Office's travel insurance policy would pay out in these circumstances.

In both cases, your being in a high-risk part of a country would make the policy void and leave you exposed to costs that could run into tens of thousands of pounds.

The FCO currently lists 27 countries and, along with such high-profile areas as Afghani- stan and Iraq, more popular destinations for adventurous travellers are featured, including parts of Azerbaijan, Columbia, Albania and Russia.

However, if you have been injured in what the Post Office calls an "isolated act of terrorism in countries that do not carry an FCO warning" then any personal injury expenses will be met, explains Post Office spokeswoman Hayley Fowell.

What you can expect from an insurer is just as vague if you're not injured in a terrorist atrocity but still left stranded. Should your hotel be struck by a bomb, destroying or damaging all your personal possessions, whether or not you get transitional support and a payout at the end will depend again on your insurer's attitude to risk. So check the details of the policy.

When it comes to replacement accommodation in the event of terrorism, most travel policies provide no cover. If your hotel room is badly damaged, it will be up to you, if you're travelling independently, to deal with the company running the hotel to find alternative accommodation.

If you have no luck or the hotel is not part of a chain, you could be out of pocket if you've paid for a long stay in advance.

However, if you've booked with a tour operator, it's that company's responsibility to help you out.

Nor is travel cover much help if you're caught up in the aftermath of an overseas bomb attack and want to curtail your holiday and fly home early.

In these cases, it will be up to you to contact either your tour operator to take you home or, if you travelled independently, to get in touch with the airline to rearrange the flight home and with the hotel for any refund on accommodation.

Similarly, you could find yourself without much assistance from your insurance if you have made arrangements to travel to a country such as Indonesia in the next few weeks, and now want to cancel your holiday.

Insurer Churchill, for example, has a terrorism exclusion for cancellations. Instead, it advises customers to contact either their travel agent, tour operator or airline (for independent travellers) to reschedule their trip.

Away from the limits of travel insurance, it's worth noting that, with life cover, most standalone policies contain no terrorism exclusions and will pay out if you're a victim.

And neither are there any bureaucratic difficulties for those victims of terrorism who have taken steps to insure their earnings."If you're caught up in this and injuries mean you can't work, then your income protection policy will pay out," says Kevin Carr of the insurance broker Lifesearch.