Consuming Issues: How to protect your holiday from disaster

A volcano has done more than anything else to expose the gaps in financial protection for travellers. When Eyjafjallajökull erupted in April, hundreds of thousands of holidaymakers discovered they would not be helped by insurers and airlines. Political unrest in Thailand and the British Airways strikes have underlined the need to prepare for the worst before venturing abroad. Here is a brief guide to holiday protection.

Health problems

Annual policies have fallen to as little as £25, but it's wise to check what's covered. Consumer organisations recommend medical cover of at least £2m because flying an ill person home is extraordinarily expensive. Terrorism or civil unrest are usually excluded. And when unforeseeable events occur some firms are more generous than others. Columbus Direct, Direct Line, Direct Travel, HSBC, Marks & Spencer, the Post Office and Saga paid out for the ash cloud. AXA, Aviva, Endsleigh, Europ Assistance and Swinton didn't.

Cancelled flights

Legislation from Brussels, the Air Passengers Rights Directive, covers many flight delays and cancellations. The regulations are quite complex (see Air Transport Users Council's website for full details), but broadly they cover people flying within Europe or on EU airlines. Norway, Switzerland and Iceland are also covered by the directive. Carriers must pay compensation as well as a refund if they cancel a flight less than two weeks before departure. For delays of two, three and four hours, depending on the distance, carriers must pay compensation of €250, €400 or €600. Stranded passengers are also entitled to meals and refreshments, telephone calls, fax messages or emails, and hotel accommodation and transport between airport and hotel.

Airline strikes

Airlines have to pay out for strikes under the same legislation. However, while still being obliged to provide new flights and expenses, they do not have to compensate passengers if there are "extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken". This exemption applied during the ash cloud, meaning travellers should have been given new flights and accommodation and so on but not compensation, for which they had to approach insurers, some of whom rejected claims.

Tour operator goes bust

The Package Holiday Directive protects people booking "package holidays", when a tour operator provides at least two of the following: flights, accommodation, car hire and entertainment. Holidaymakers are protected if a trip is cancelled or an operator becomes insolvent. In the UK, this is organised under a bond scheme run by Atol (Air Travel Organisers' Licensing) and you should check a tour operator has an Atol number and, if suspicious, check that number. However, with the rise of the internet, many people no longer book traditional sun, sea and sand trips and the EU is looking at extending the rules to cover "dynamic packages" where flights, hotel or car are booked separately. Last year, some 27 million holidays taken by Britons did not enjoy this financial protection.

DIY travel unravels

Passengers who book flights direct are only covered for the airline going bust if they paid more than £100 on a credit card or took out insurance. Expedia and some other websites are covered by Atol for two or more elements of a traditional holiday such as flights and hotel. If EU accommodation, flight or car hire are all booked separately, problems may be pursued with the help of the European Consumer Centre on 08456 04 05 03.

Heroes & villians

Heroes: Trains

British trains are slow, expensive and late compared to those on the Continent. Well, slow and expensive ... Network Rail revealed this week that 91 per cent arrived on time in the year to March, the most since records began in 1992. It defines "on time" as within five minutes for commuter trains and within 10 for longer services.

Villain: Fiat

A few years ago Italy's industrial giant made cars with engines that lasted for ever. Alas, it was second bottom in a What Car? survey of 27 marques, ahead only of Chevrolet. Lexus, Honda and Jaguar came out top in the poll of 17,000 owners by JD Power. The least liked vehicle was the Ford Ka and the favourite the Lexus RX.

m.hickman@independent.co.uk