Even break for travellers

Steve Lodge examines the changing world of holiday insurance - competition is hotting up

Diy tourists and travellers are being targeted for new one-trip policies by a travel insurer that previously had a claim to offer "the world's best-value cover" upheld by the Advertising Standards Authority.

WorldCover Direct launched into the fast-growing annual policy market last year, offering relatively generous cover on an unlimited number of shorter trips for a competitive one-off premium of pounds 75. It is making the same "best-value" claims for its new one-trip policies, aimed at people going away for periods from a weekend to a year.

Meanwhile, Columbus Travel Insurance, which claims to have been the first travel insurer into the "direct" (phone-based) market, is increasing cover levels on existing policies while maintaining what seem keen prices.

Such moves should boost competition in the pounds 400m-a-year travel insurance market.

Perhaps 10 million people will buy travel policies this year, most linked to a particular package holiday. Those sold by travel agents are often not good value, although people are frequently required to take them out to get a particular deal, or to pay a supplement if they don't.

But perhaps 2 million people already have annual policies, which offer the convenience of not having to take out new cover every time you go abroad and which, at pounds 100 or less, can work out a lot cheaper depending on how often you travel. Meanwhile, the Office of Fair Trading is soon to publish findings on the selling of travel insurance which may help to break the stranglehold of conditional deals.

With its new one-trip policies, WorldCover Direct is thought to be the first to set prices according to the exact number of days and the specific countries to be visited. For example, after this week's bomb in Saudi Arabia, that country will be more expensive than Tunisia.

This means that people do not have to pay for cover they don't need - if you want insurance for two weeks, many policies will band you with people going for 17 days, for example - and rates for people going to safer countries outside Europe will be less than for more dangerous locations.

WorldCover (0800 365121) is currently quoting a premium of pounds 12.66 for a 10-day trip to any European country. Such a rate appears highly competitive - WorldCover says Thomas Cook would charge pounds 22.85; Lunn Poly pounds 29.95; the Post Office pounds 16.90; and Bradford & Bingley building society pounds 22.00.

The newcomer's cover also compares well, including pounds 10m of medical expenses, pounds 1,500 for personal luggage and pounds 250 for cash. One exception is that Bradford & Bingley's carries no excess as standard - WorldCover's is pounds 35, which is fairly typical.

Columbus (0171-375 0011) also looks good on price. It quotes pounds 14.25, or pounds 10.95 for its "standard" policy that excludes money and baggage. But even after planned improvements to its cover, effective tomorrow, the "super" policy still looks less generous than WorldCover's - for example, cover for cash is pounds 100.

Other insurers are expected to follow WorldCover's move to charge by the exact number of days, which should allow more potential for savings.

However, some insurers warn that people might prefer cover for an extra day or so in case, say, of delays on the way home. And WorldCover concedes that people going to riskier countries may be better off with another firm.

The cash savings available if you shop around for policies for short holidays are relatively minor. And they may be more than offset if a travel company tries to penalise you for not taking out its policy.

By comparison, travellers going away for long periods face big insurance bills whoever they buy from. WorldCover will charge pounds 350 for a year's cover for travelling around the world and an optional surcharge of pounds 100 to cover all sports and activities (so long as they are supervised) from white-water rafting to bungee jumping. Full-time students are offered a 20 per cent discount. Some budget travellers may be more tempted by Columbus's Globetrotter policy, which charges just pounds 179 for a year but excludes, in particular, baggage and money. With Columbus, hazardous sports may be subject to individual surcharge - the case with most policies.

Which? magazine published a best-buy guide to travel insurance in March this year, still available in many public libraries. The report lists a range of best-buys, including those for single people, families and the elderly for different types of trip. It emphasises the need not just to buy on price, but to ensure you are properly covered for the trip(s) you are making.

The report suggests a basic set of requirements you should look for in any policy: medical expenses of pounds 250,000 in Europe, pounds 1m elsewhere; liability cover (for claims against you) of pounds 2m-plus for the US and pounds 1m elsewhere; pounds 3,000 for cancellation or curtailment (say if a relative dies); pounds 1,500 for baggage; and some cover for cash.

Also bear in mind cover you might already have. This could save you money:

q Under an "all-risks" extension to your home contents policy, your belongings will be covered even if you take them abroad. You may be able to get a discount of 20 per cent from a travel insurer if you do not want baggage cover.

q Getting an E111 form free of charge from the Post Office could entitle you to free or low-cost medical treatment in Europe. But even the Department of Health warns that this will not be sufficient. However, some insurers, including Columbus, will waive their excess for carriers.

q If you have private medical insurance you could be covered abroad. Again, you may be able to get a discount on a full travel policy.

q Paying for flights or a holiday with a credit card is worth while because if the company goes bust you can claim a refund from the card company. Some gold credit cards also offer full travel insurance as a perk which could be substituted for a separate policy. The Which? report said Coutts' Gold Card and NatWest's Gold Mastercard met its basic checklist of cover, with Barclays Premier and Midland Gold Mastercard fine for trips outside the US. However, these cards have hefty annual fees.