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Are you covered by your Travel Insurance if your airline was to go bust?

In the wake of the recent collapse of Monarch and with the general state of the industry at the moment it is now more important than ever to make sure you have purchased good travel insurance that includes ‘scheduled airline failure’ cover.

Surprisingly a large group of insurers including some big-name banks will decline to step in and pay if your chosen airline collapses before you are due to travel or whilst you are away.

Overall about half of all UK travel policies on offer do not cover Scheduled airline failure according to the analysts Defaqto.

Until quite recently most people relied on the Air travel organiser’s (Atol) scheme which protects package holidays or the protection offered if you purchase using a credit card.

But since the substantial rise in the low-cost carriers and the attraction of a do it yourself type holiday arrangement you will want a travel insurance policy that specifically includes this cover. Especially when purchasing expensive peak-time flights that would cost a lot to replace last minute.

In the case of the Monarch collapse the Civil Aviation authority has stepped in to help passengers caught up in the chaos but with very few replacements flights available this isn’t always a viable solution even if it is offered. According to a recent survey by there have been 254 global airline failures in the past ten years. Back in 2008 when XL airways collapsed it left over 200,000 passengers holding worthless bookings. Those who had not paid by credit card were left trying to reclaim the costs via their Travel Insurance providers, most unwilling to pay out.

Check the small print

It can be hard for consumers to know whether they have cover or not. This is often due to the T&C’s so poorly worded so always check the small print.

Flyaway by Credit card

The collapse of Monarch airlines is a reminder to all consumers that using a credit card when purchasing a flight insures that you will be covered against the collapse of an airline.

When you buy something costing over £100 and pay by credit card, you can hold the card provider jointly liable to provide the service. If the supplier or airline isn’t around to provide the item or flight, the bank is responsible and will step in.

The protection was enshrined in section 75 of the Consumer Credit Act 1974, but there are crucial caveats. Make sure you book the flight directly with the airline not via an agent or booking website.

A lot of people still prefer to pay using their Debit cards which you can file a ‘chargeback claim’ if you contact your bank. However, this often do not succeed there are no guarantees.