Beached Holiday? Sun-seekers left high and dry

What happens if your tour firm goes under while you are away, asks Mark MacKenzie

Holidaymakers who risk being left high and dry and far from home are being urged to check they are adequately covered against their tour operator going under.The advice from the Civil Aviation Authority (CAA) follows the collapse of a Cheshire-based company, HCCT Holidays, which left up to 1,000 Britons stranded on the island of Tenerife.

Fortunately, the company was a member of the Air Travel Organisers Licensing scheme (Atol). This meant the CAA was able to organise repatriation for those marooned and refunds for those holding future bookings. But had those holidaymakers booked their travel independently, it would have been a different matter.

Coming in the month that is traditionally a boom time for summer bookings, the CAA's warning is a timely reminder of the damage insolvency could do to a much-anticipated break. "On any package where there is a flight involved travellers have financial protection under the Atol scheme," explains David Clover of the CAA's consumer protection unit.

"While this does include all holidays bought through traditional operators, if you're borrowing a villa from a bloke down the road, flying on a budget carrier and hiring a car yourself, you won't be covered." The CAA estimates that more than 18 million people will piece together their own holidays this summer.

But should only one element of your holiday collapse you might expect to dial your travel insurer's emergency number.

Think again, says Malcolm Tarling of the Association of British Insurers. "Most travel insurance policies will not cover the failure of an operator or service provider, such as a car hire company," he says.

"The policy will have very specific wording regarding exclusions to your contract and this will almost certainly be one of them." Part of the problem, says Mr Tarling, is that while many consumers pay careful attention to the levels of medical and luggage cover when insuring an independent holiday, the relatively unglamorous nature of insolvency means it can often pass them by.

So what can you do? "A good insurance broker can direct you to those policies that will cover you but obviously that will be reflected in a higher premium," says Mr Tarling. "Insurers are always looking for ways to improve products and if the insolvency of an operator is well publicised, they will try to make something available."

The same applies to the increasing number of travel insurance policies taken out on an annual basis. As "general insurance" products, their regulation falls within the remit of the Financial Services Authority (FSA). "It's fair to say they aren't the norm," says an FSA spokesman, "but annual policies covering insolvency are available."

It's a view shared by David Clover. "The reality is that products offering insolvency cover are few and far between," he says. If you do want to book a break on an accommodation-only basis, however, you don't have to give up your rights.

"Under the Consumer Credit Act (2006), credit card companies have joint liability with the service provider - if the service isn't forthcoming for any reason, and that company has no money available for a refund, the consumer can then turn to their card provider."

Buyer beware, however; if you choose to pay with a debit card, no such protection exists.

"An alternative is to look for providers bonded by independent organisations," says David Clover. "The Association of Independent Tour Operators (Aito), for example, has its members bonded on the basis of what they provide. If it's accommodation only, some financial cover will be available. All these organisations display badges. If you don't see them when booking your break, you need to think where your protection is coming from."