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If you are worried that the airline you are travelling with will go bankrupt before or during your holiday, you may want to get a travel insurance policy that offers financial default insurance. However, not all travel insurance policies offer this as standard, and some only offer it under certain conditions, so you may want to check the small print on your policy documents before signing them.

Financial default cover usually only applies if an airline has completely ceased trading due to financial reasons. Even if a policy includes this as standard, it may only apply if you buy your insurance less than a couple of weeks after you book your flights.

Before buying a travel insurance policy, make sure that you have a good look at the policy documents to see if they do indeed offer financial default insurance. Some of the more basic packages, and especially those offered by the airlines themselves, do not include this type of protection, so if the airline ceases trading for financial reasons, you will be left up the creek without a paddle.

This type of cover will not protect you if your travel agency goes under, as travel insurance policies usually specify that financial default coverage only applies to travel suppliers, such as tour operators, airlines, and cruise lines, and not to the company that sold you your travel insurance.

If your trip consists of a number of journeys with different travel suppliers, then you will only be covered by financial default insurance if you miss your whole trip as a result of one company going under. So if you had booked a flight to Barbados to board a cruise ship, and the cruise company goes out of business, you would not be refunded for your flight.

In order to prevent a rush of insurance orders following the announcement that a travel supplier is in financial difficulties, there is usually a waiting period written into the insurance policy. This can range from a few days to a few weeks between buying a policy and the travel supplier declaring bankruptcy.

Also, you should check whether the underwriter of the policy has a list of approved travel suppliers. If they do, and your travel supplier is not on the list, then you will not be covered if they go bust. Do not assume that most reputable suppliers will be on the list, as these lists can be surprisingly short.

The best policy is to buy your insurance from an independent supplier as soon as you can after booking your holiday, and make sure you check the small print before you sign.

1stoptravelinsurance.co.uk provides cheap annual travel insurance with cover to travel as many times as you like for up to 45 days at a time.