Avoid this painful holiday cost increase

Travel insurance is set to rocket in the New Year - so if you've got a trip booked for 2011, take out cover now!

Now that Christmas is over, you'll no dobt want something else to look forward to. If you are thinking about planning your next holiday soon, I have some bad news.

Travel insurance giant Axa has just announced that it is increasing its prices by at least 10% in the next couple of months and industry insiders are predicting that other providers will follow suit with cheaper policies rising by as much as 40%!

The price hikes are being blamed on a combination of rising overseas medical costs, increasing amounts of fraud and a weak exchange rate leading to high claims costs.

2010 has also been a tough year for travel insurers with the ash cloud, crew strikes and airline failures leading to a large volume of claims.

So if you’ve got a holiday booked for 2011 but haven’t yet taken out travel insurance, here’s my top tips to beating the price hikes and getting a good deal...

Get the best price

There are two main types of travel insurance: single trip cover and multi-trip annual cover. If you’re planning one holiday in any 12 months space then you should go for single trip cover. But if you have two or more trips planned the annual cover will probably cheaper – as it will cover you for the whole year.

Here are two tables showing the rates for single trip cover and annual multi-trip cover depending on your holiday destination (rates are correct on 10th December 2010).

All premiums are based on a minimum of £5m of medical cover, £1500 of baggage cover and £2000 of cancellation cover (most policies will offer a higher figure on at least one of these covers though) for a family of four (2 under 18s) with no additional cover.

Single trip cover (10 day holiday)

The market leading rate is in bold.

Annual multi-trip cover

The market leading rate is in bold.

As you can see, if you’re travelling outside of Europe more than twice a year – a multi-trip policy will work out best for you, with yearlong cover for little more than £40.

If you’re staying within Europe, single trip cover is cheaper if you’re making two or three trips. But remember, if you decide on any last minute breaks you’ll have to take out another single policy which could be considerably more expensive after the price rises. Go for a multi-trip policy and you’ll be able to take as many holidays as you want and still be covered by one policy.

To get a quick, personal quote head over to the lovemoney.com travel insurance centre.

Get the right cover

In terms of getting the right amount of cover, it’s important to think about exactly what you’re going to be doing on your holiday. The value of cover detailed above is a good starting point for a family holiday as the cost of medical treatment overseas can vary hugely. A simple ear infection could cost you around £300 to treat in many countries – whilst treatment for a broken bone could stretch into tens of thousands of pounds.

Travel insurance providers also offer extra cover for especially dangerous trips such as winter sports, scuba diving or adventure holidays. This will offer increased medical protection as well as cover for your equipment.

But cover rates will vary depending on what type of activity you’re planning on participating in. So if you’re a fan of off-piste skiing or shark diving, it’s a good idea to let your insurer know before you leave!

For more on winter sports cover read Five essential travel insurance tips for skiers.

You should go for a higher value of cover if you’re pregnant or planning on taking a lot of valuables with you as well. Business travellers can get tailored year-long cover to protect expensive laptops and PDA’s.

Old-age can also affect a travel insurance claim, to find out more about this read Travel insurance for the over 65s.

Things to remember

There are a few things you should keep in mind when taking out a travel insurance policy to make sure you’re dream holiday doesn’t turn into a nightmare.

• Take out a policy as soon as you book your holiday. But don’t be tempted to always take out a policy with the same people you book your trip with. It may seem simpler, but online insurers often have considerably lower premiums. Head to the lovemoney.com travel insurance centre to get a quote.
• Find out what is not covered. This was the lesson many holidaymakers stranded by the ash cloud learnt when insurers rejected their claims. You should also check whether you’ll be covered if a family member dies and you need to return home.
• Pre-existing medical conditions may void claims if you don’t warn your insurer about them. But it will push up you’re premiums.
• Get an EHIC card. The European Health Insurance Card is free to get and will entitle you to free or subsidised medical treatment in any European Economic Area country or Switzerland.
• Credit card and bank account protection. It’s worth checking whether your bank or credit card provider offers any free or discounted cover. But make sure you read what exactly is covered, as free insurance is often limited in scope.

So there you have it, for more on travel insurance read Claim £1100 of your holiday costs back.

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