Research group Defaqto warns that over two-fifths of travel insurance policies offer no protection for airline failure leaving holidaymakers exposed. Only around half (48%) of travel insurance policies offer cover for airline failure as standard.

Which? says that your rights depend on whether your booking has Atol protection or not.

With Atol protection

Under Atol protection, you are guaranteed a refund if a company collapses, and you will be found an alternative flight home if you’re stranded abroad.

If you booked your flight through a travel agent, or as part of a package deal, you will almost certainly have Atol protection. Travel companies must display their Atol licence number on websites and brochures.

If the airline goes bust before your holiday, contact your travel agent. Your booking may remain in place. If so, your travel arrangements should continue unaffected, though there may be changes to flight times.

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If the group can’t honour the booking, you should get your money back in full. If you’re abroad when the airline goes bust, you must be found an alternative flight home if you’re stranded abroad. There should be no extra costs, but you will need to talk to your travel agent.

Without Atol protection

If you booked flights directly with the airline this may not be covered by Atol. This is when you would need travel insurance.

If you are abroad without Atol protection, you’ll usually need to book alternative flights back with another airline and pay for it yourself. There are exceptions: the UK government paid to get people home for two weeks when Monarch went bust and some airlines offer reduced ‘repatriation fares’ for stranded passengers.

Your insurance provide may pick up the tab, but you need to check before you book and, as the Defaqto research shows, it’s not guaranteed.

Brian Brown, head of insight at Defaqto, said: “With flights and holidays cancelled as a result of the Flybmi collapse, a lot of people’s holidays will be ruined over the coming months. Airline failure is not covered as standard on two fifths of travel insurance policies as the risk is usually relatively small.

“Anyone who has booked a package holiday with Flybmi, will be fully protected through the Atol scheme and should not lose out. However, those who have booked flights directly and haven’t travelled yet, are at risk.

“If you paid for your flight with a credit card, you will be able to get a refund from the credit card company and should contact them directly for this. If you bought your flight with a debit card, you may be able to claim under your travel insurance policy if you have this cover.”