The typical insurer will cover cancellation costs of up to £5,000, according to the British Insurance Brokers’ Association (BIBA).

But with the luxury travel market growing in popularity – especially among retirees using pension freedom cash – travellers could find themselves out of pocket.

YourMoney.com reader Jennifer* and her husband, both 65, have two trips booked this year – wildlife and jaguar watching in Brazil and a whale watching expedition in the Arctic – costing £13,200 and £16,195 per person respectively.

But Jennifer found most travel insurance policies came with cancellation cover in the region of £5,000 to £10,000, meaning even if she bought the cover, she would still lose thousands of pounds if she had to claim.

Some insurers state they would cover cancellation up to £10,000, but if the value of the trip was above this amount, they wouldn’t pay out a penny.

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Jennifer says: “I contacted the trip provider for advice but their response was somewhat ‘blasé’. They require customers to be insured but only request details of the insurer. In their eyes, the level of cover is the customer’s responsibility.

“I find the fact that they are aware, and have no viable solution, somewhat unconscionable and reprehensible. It does however confirm that such level of cover for most cancellation costs is not readily available. Perhaps it is assumed that if we can afford to go on such expensive trips we can afford to forfeit the costs. I can assure you this isn’t the case.”

Jennifer bought insurance from Staysure which specialises in cover for the over 50s. An annual policy cost £1,800 for the couple and covers cancellation up to £15,000, which means they would still lose £1,195 on one of the trips if they were forced to cancel. However, Staysure adds that when customers call to discuss their requirements, its policy is to tailor coverage to try to accommodate the full amount to be protected.

Staysure says that in August 2018 alone, it has seen the highest number of customers taking out policies with cancellation cover of over £10,000 and £15,000, which it says “suggests that those travelling in later life tend to get away less but they’re staying for longer”.

‘Difficult to get adequate cancellation cover’

Jonathan Upton, founder of That’s Insurance, a travel insurance comparison site which holds details of every online direct policy, found that out of 494 single trip policies available, only 89% offer cancellation cover up to £5,000. The remaining 11% offer cover up to £10,000.

“If you purchase a holiday which costs more than £10,000 per person, it’s very difficult to get cover.

“Several of these companies which provide cancellation cover up to £10,000 stated that if the cost of the holiday was more than that, they wouldn’t pay out a penny. So you could have a situation where your holiday cost £11,000 per person and you took out a policy which covered up to £10,000 thinking that was better than nothing, only to find they wouldn’t pay out anything.”

He adds: “The vast majority of companies are competing to cover the holiday of ‘Mr and Mrs average’ and don’t have the facility in place to cover the more expensive holidays. Insurance is an easy product to buy online but it’s also one of the most complicated and consumers don’t read the small print.”

Data from business information site Defaqto which looked at over 1,000 insurance policies found the following cancellation cover amounts based on single trip travel:

What should holidaymakers do?

Graeme Trudgill, executive director at BIBA, says cancellation cover is available for more exotic, expensive and riskier trips, and while there are plenty of cheap travel insurance policies, consumers really need to look at whether the limits are suitable for their needs.

He says: “The first question customers should ask of an insurance broker, specialist, bank or wherever else they get their insurance from, is ‘If a trip costs £16,000, can you give me £16,000 of cancellation cover?’ If it can’t, move on to a firm that can.

“BIBA’s Find a Broker Service (0370 950 1790) is used by half a million people each year. Due to the pension freedoms and improved healthcare, we’re certainly seeing more travel on more exotic or expensive trips.

“Cancellation limits should be noted right at the front of a policy. Cancellation cover isn’t just for the duration of the trip. If you were to buy a cruise in six months’ time and you buy a policy today and something happens within those months which prevents you from going, you’ll be covered for many months leading up to the departure.

“It’s a big area of cover – one in every three claims are for cancellation and with a lot of retired people going on these trips, who may be more vulnerable or less resilient, they’re more in need of travel insurance.”

Upton suggests holidaymakers also check out local specialist providers, and not just keep their research to the internet. “There may be some insurers on the high street looking at insurance needs on a case-by-case basis. It may not be a quick process but if you’re prepared to spend thousands of pounds on a holiday, you need to do your research to buy the right insurance.”

Dr Matthew Connell, director of policy and public affairs at the Chartered Insurance Institute (CII), says:“There are specialist brokers that cater for very high levels of cancellation, and specialist underwriters that offer top-ups to standard travel insurance such as P J Hayman & Company.

“I think one reason why many insurers may hesitate to offer very high levels of cancellation cover is that most travel insurance premiums are very low, so one claim on a high level of cancellation cover may wipe out any profit made on thousands of smaller policies. So building up a balanced pool of risk that allows very large levels of cover is difficult.”

Luxury holiday firms – what do they say about cancellation cover?

YourMoney.com contacted a number of luxury holiday providers to see what their policy is on travel insurance and whether they have partnered up with specialist insurers to cater for the needs of customers.

Here’s what they told us:

Scott Dunn: It doesn’t have a recommended list of insurers but says it is essential for customers to arrange appropriate travel insurance prior to the holiday.

Turquoise Holidays: It doesn’t offer insurance as part of the price of the trip but does suggest using luxury travel insurer Campbell and Irvine. However, the maximum cancellation cover offered is £10,000.

Kuoni: Doesn’t have a recommended list of insurers but does suggest holidaymakers seek insurance for their trip.

Cox and Kings: Unavailable for comment.

^{*Not her real name to protect identity}