Travel insurance premiums are lower if you book nearer your trip – but is it worth the risk?

Buying travel insurance at the last minute can mean paying lower premiums.

However, leaving it late in the day also means you’re taking on more risk.

In tests conducted by This is Money, a family of four can get travel insurance for a week in Spain for £15.05 when booked on the day of travel – the cheapest quote available.

The price was 20 percent more if you booked a month in advance and 21.8 percent more if you booked six months in advance.

For annual multi-trip cover, the same family would pay £32.65 if purchased on the day.

But they’d pay £56.51 – or £23.86 more – if they bought this cover six months in advance.

The reason is that travel insurance reimburses cancellation fees, as well as delays, lost luggage and medical expenses while travelling.

The chance of claiming a cancellation insurance is of course much greater the longer the policy runs.

That means greater risk for the insurer, and a higher premium to reflect that.

A spokesperson for travel insurance company Staysure said: ‘Travel insurance is often cheaper the closer the purchase date is to the holiday start date due to the reduced risk exposure.

By purchasing closer to the start date of your holiday, the time window for possible cancellations or unforeseen events is smaller, resulting in lower risk for the insurance company. This reduced risk exposure is reflected in lower premiums.”

When should I take out travel insurance?

The safest option is always to purchase travel insurance as soon as you book the holiday.

Some holidays may include free cancellation, but otherwise travel insurance is your best bet.

If all you care about is lost luggage and medical bills, you may be able to save a few bucks at the last minute by purchasing travel coverage.

This is likely to apply to solo travelers heading for cheap European travel with budget airlines and flexible hotel bookings that can be canceled at the last minute.

However, buying travel insurance late to save money can be a risky game.

First, the savings from booking coverage late aren’t always huge.

Our example of a family of four, above, could save £4.20 on their insurance by buying it on the day compared to six months in advance, or £3.77 if they buy one month in advance.

However, the costs of a canceled holiday can run into thousands of euros.

Taking out cover at the last minute can also mean that fewer insurers are willing to offer you a policy. This may mean that you have to pay a higher premium or that you do not get the level of cover that you need.

In addition, if your holiday is canceled due to bad weather, the travel insurance will not pay as predicted when you bought the policy.

Tony Brown, director of underwriting at travel insurance company Tifgroup, said: ‘Buying your travel insurance close to your departure date can reduce the likelihood of having to cancel your holiday and file a travel cancellation claim.

“That’s why it can sometimes be cheaper to buy your protection at the last minute.

‘Nevertheless, it is wise for holidaymakers to purchase travel insurance as soon as they book their trip so that they are fully protected from the start.

“Having protection as soon as you’ve booked means you’re often covered in case you need to cancel your trip for any number of reasons that can crop up between paying for your vacation and actually going on vacation.”

Other ways to get travel allowances

Most insurers ask travelers to try to get a refund or rescheduled trip from their airline, tour operator or accommodation provider before paying any claims.

ATOL protection covers people taking a package holiday that involves a flight.

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.

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?

Many 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 incur additional costs for you.

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

DIY package tours are also not covered by either scheme.

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.

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.

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.