Does your travel insurance protect you from the volcanic disruption?

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By Rachel Jones
Know Your Money Editor

Many flights have resumed service to and from the UK and much of Europe's skies were closed down after a volcano in Iceland erupted, sending clouds of ash into the sky.

The decision to close airspace came after concerns the ash would form molten glass in engines, preventing them from working.

However, while safety has been put first, thousands of Britons have been left stranded abroad, many of whom have had to shell out for taxis and ferries in order to get home.

But what exactly can individuals claim on their travel insurance policy and how hard could their finances be hit by the shutdown?

Insurance advice offered to stranded Britons

The Association of British Insurers (ABI) advised Britons those with single-trip insurance policies will automatically have their cover extended, with a period of approximately one month offered by insurance companies.

And for those stuck in the UK because their flights have been cancelled, they can change the dates on their policy at any time by contacting their provider.

Nick Sterling, director of general insurance and health at the ABI, said cover for travel abandonment and delays could be available depending on the terms and conditions of policies and the level of cover purchased.

This could hint that while cheap travel insurance is ideal for many cash-strapped Britons, they should ensure the cover they buy is suitable for their trip and does not leave them out of pocket should an unexpected event occur.

Mr. Sterling explained: "This will vary as there is no standard travel insurance policy. Payment for delay, whether outward or return, is usually a fixed amount per delayed period up to a maximum figure, not an open-ended sum."

Furthermore, he dismissed insurers were relying on an 'act of God' clause to avoid paying out for the eruption - an event that is not specifically covered by firms.

So how do insurance policies fare?

People who purchased their travel insurance with Halifax were told to contact their tour operators or airline to see how they can be helped.

For those who are not covered by such organisations, the bank said it was prepared to provide extra help to its customers by reimbursing them for "additional reasonable costs" as long as they are eligible for travel cover through their policy or Ultimate Reward Current Account.

Customers of HSBC, first direct and Marks And Spencer travel insurance policies have been told although volcanic eruptions are not usually covered, the three firms will accept claims from affected travellers.

Paul Thurston, chief executive of HSBC Bank, stated: "The volcanic ash disruption is an unprecedented event and has left thousands of travellers disappointed. Not all insurance policies are the same, but we at HSBC believe that standing behind our customers on this extraordinary occasion is the right thing to do at this time."

However, extended cover is only available for trips booked before midday on April 15th 2010.

One interesting branch of support comes from Lloyds TSB. Customers stuck abroad who are suffering financial problems can use their overdrafts and credit cards to help see them through.

The bank will waive charges incurred by credit card and bank account customers while they've experienced travel disruption. This could be welcome news for individuals who have had to pay for alternative travel and accommodation.

Such fee revokes are applicable to late payments and charges incurred because a customer has gone over their agreed credit limit while out of the country.

And finally, Barclaycard and Barclays customers have been reassured of up to 14 days cover free of charge if they are unable to return back home before their travel insurance policy ends.

Barclays will consider claims for delayed departures "as a gesture of goodwill" and will continue to offer such help while the Iceland situation continues.

So what now?

With flights resuming and travel insurance companies offering their support, the only major result of the fiasco should be inconvenience, rather than significant financial losses.

Welcoming the initial lifting of the air travel restrictions, ABTA - The Travel Association, said priority will be given to stranded passengers outside of the UK.

But chief executive Mark Tanzer reminded Britons they could still face disruptions. As such, people planning to travel over the coming weeks might want to ensure they have the right level of travel insurance.

Individuals who do not normally buy travel insurance may be reminded from the experience that unexpected events do occur and the small expense of a policy can negate future, large costs, which could seriously eat into holiday spending money.

To compare travel insurance policies from leading UK providers take a look at our Travel Insurance Comparison Chart here.

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