A new report suggests that only around 20 per cent of travel insurance covers policy holders adequately in the event that the airline that have booked with goes bust. Financial researchers at Defaqto found that although there may well be cover for airline failure contained in an insurance policy, the small print often revealed that the value of that cover was capped.

This means that although the cost of the air ticket may be covered, the value of facets of the holiday such as accommodation, car hire, pre-booked excursions etc on which money had already been spent, could be lost.

Head of research at Defaqto, Brian Brown said that it was important that holidaymakers review their travel insurance before they go away to make sure that they are covered for everything they might need to be covered for. He added that many insurers cover customers for up to £1,500 in the event that an airline goes bust, but pointed out that this really wasn’t that much when one considered the value of the other parts of the holiday which could be lost as a result.

Another way of ensuring that money is not lost due to a travel company or an airline failing, is to check that the company they are travelling with is either Abta or Atol-bonded. Both organisations make sure that members pay a certain amount of money into a pot in order that customers can be reimbursed should a licence holder fail.

Some protection can also be afforded by booking parts of the holiday worth more than £100 on a credit card.