ATOL protection: What does it cover and will it get you a refund on your package holiday?

Compensation for canceled package holidays could change with a shake-up of how ATOL rules work – but research shows consumers don’t understand the rules we have now.

According to the Civil Aviation Authority, which oversees the ATOL scheme, holidaymakers are uncertain about their refund rights and entitlements around replacement holidays and flights.

The CAA, which advises on increasing ATOL funding, also noted that “consumers lack knowledge of key elements of ATOL protection,” especially around compensation when airlines go out of business.

So what is ATOL and what does it and does not cover?

Everything you need to know about ATOL

ATOL stands for Air Travel Organizer’s License. ATOL protection covers people taking a package holiday that involves a flight.

The scheme was set up in 1973 to prevent people flying abroad from being cut off if their holiday company goes out of business. It promises holidaymakers a refund or a replacement trip if a holiday travel company fails before their trip begins.

If a package tour company goes out of business during a trip, ATOL protection pays for lodging and can handle refunds for things like car rentals and flights home.

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What is ABTA?

If you’re wondering what protection you get for booking non-flight vacations, ABTA steps in.

Protection by ABTA, or the Association of British Travel Agents, covers package holidays including travel by road, sea or rail.

If your package tour company goes out of business, ABTA will pay you the money you spend on accommodation and travel, including transport home if you get stuck abroad.

However, ABTA says package tours of less than 24 hours or for business travel may not be protected.

What is not covered by ATOL or ABTA?

A lot of things, for example if your luggage is lost or stolen, if you need medical treatment abroad, if you have to cancel a trip or if there are delays that will cost you extra.

That is why it is still important to take out the right travel insurance, even if your holiday is covered by ATOL or ABTA.

>> Read our guide to getting the right travel insurance

DIY package tours are also not covered by either scheme.

Exception: ATOL usually does not pay compensation for a canceled flight, unless it is part of a package tour and the operator has gone bankrupt

An important exception with ATOL is that it does not only pay out for canceled flights, but only for air travel as part of a package holiday.

The CAA said ATOL only covers problems with flights where the operator doesn’t go under in rare circumstances, such as “on flights where you pay for your ticket in installments or don’t receive your ticket immediately after payment.”

If you booked a flight yourself through a travel agency, it may be ATOL protected if the company fails, but this depends on the circumstances.

ATOL said: “Your travel company should clarify whether your flight-only booking is ATOL protected before you book. If you buy a flight ticket from an airline or travel organization and receive a valid e-ticket against payment, then this is not covered by the ATOL scheme.’

However, separate package travel laws do entitle you to a refund if you book a flight with a package travel company that is later cancelled.

Travel insurance can help fill the gaps in both ABTA and ATOL protected vacations.

If you book a trip or accommodation with a credit card, Section 75 protection means your credit card company can pay out for cancellations.

However, this only works for amounts between £100 and £30,000, and the cancellation cannot be your fault.