Like many industries, luxury holiday operators are showing signs of the downturn. There are airlines, holiday insurance companies and travel companies reporting significant losses. Everywhere you look there are offers to tempt you into making a booking. Even the stalwart British Airways have posted losses in the region of £400m.



It is a risky and exciting time, depending on your point of view. Some travellers have taken advantage of holiday destinations that have been hit the hardest. Holidays to Iceland are yielding good value because of a favourable exchange rate following the collapse of Icelandic banks. On the other side of the coin, British travellers in Europe are noticing how the weak pound compared to the Euro can make things seem expensive.

Since holidays can amount to a significant financial outlay, what is crucial is that every traveller gets adequate protection for their holiday and the money they spend. The financial protection and assurance that comes with cheap holiday insurance is a vital precaution, perhaps more than it ever has been.

Although holiday makers going abroad may be reluctant to trust their money with travel insurance from struggling companies like AIG, the risk of your holidays - in which you've invested your heard-earned wages - being disrupted are as evident as ever. As well as delays caused by strikes, collapses such as that of the XL travel company late in 2008 will serve as a warning. It resulted in twenty one planes staying put, and about 85,000 travellers being stranded across the globe. This incident shows how important it is to look at whether your holiday insurance company will cover the cancellation of a holiday once it has begun - some don't, including many of the Irish travel insurance companies.

Such problems have shown the value of choosing holidays carrying the ATOL (Air Travel Organisers' Licensing) scheme, which refunds the traveller when holiday providers fall through on their promises. Worryingly, the proportion of holiday makers protected by ATOL has diminished by about a third in the last ten years owing to increased numbers of people arranging their own flights. For these intrepid souls, getting cheap holiday insurance takes on paramount importance. It can reimburse you when you are forced by delays or cancellations to make alternate plans.

You would expect that ‘tightening the purse strings' would mean many families postponing their holiday all together this year; what the economic downturn has done is cause a resurgence in people taking holidays closer to home. UK based resorts like Butlins are reporting increased bookings.

A survey conducted by The Post Office has shown that 25% of people taking their holidays in the UK will do it without the protection of some cheap holiday insurance. This is partly because the traditional two weeks abroad is frequently being exchanged for a series of long weekends, where people may wrongly think of travel insurance is unnecessary. It will provide cover for incidents where hotels close, domestic flights lose luggage, and even pay for hospital transfers after an accident.