Prepare to get burnt if you don't pack the right cover

The summer holidays are here and foreign shores beckon. But while you're busy picking out bargain flights along with the beachwear and sun-block, make sure you put the same energy into your holiday cover.

If you simply reach for your old E111 form and the "free" travel insurance on your current account at the bank, you could come a cropper: one no longer exists and the other is often less than comprehensive.

More than two-thirds of Britons have no idea that the E111 is no longer valid and was replaced, on 1 January this year, by the European Health Insurance Card (EHIC).

Phased in by the Department of Health from August 2005, the card is now available to all British travellers and provides free or reduced-cost emergency medical treatment in all European Union countries, plus Iceland, Liechtenstein, Norway and Switzerland.

It is valid for three to five years and covers any treatment you may need during a trip, such as the cost of medicines or hospital attention for a sprained wrist. The more serious and complicated your injury, the more likely it is that you will have to make some financial contribution yourself.

And unlike the E111, which covered the whole family, every family member must now hold their own EHIC card.

Some travel insurers won't pay out on a claim if you don't hold one, warns Richard Mason at price-comparison service Moneysupermarket.com. "Even basic medical treatment in mainland Europe does not come cheap, so this replacement card could save you a lot of unexpected financial pain."

The EHIC provides access to state-provided medical assistance only, and people will be treated on the same basis as an "insured" person living in the country they are visiting.

That said, with the EHIC, you may not be covered for all the things you would expect to get free of charge from the NHS in the UK, such as painkilling drugs, and you may have to make a contribution to the cost of a period in hospital.

You can obtain the card by visiting www.dh.gov.uk/travellers, phoning 0845 606 2030 or by posting a form available from post offices.

There is a common misconception that if you hold an EHIC card, this eliminates the need to take out any extra cover. To dispel this, the Department of Health is now urging holidaymakers to take out travel insurance for visits to all countries - regardless of whether they are covered by the EHIC.

"As well as offering much more comprehensive cover for medical treatment [such as the cost of flying you home if you suffer a serious injury], travel insurance protects you financially for lost or stolen possessions, holiday cancellation, personal liability and a range of other costly eventualities," says Mr Mason.

At the same time, travel insurance won't pay out on routine treatments and so does not negate the need for an EHIC; the two should be carried in tandem.

The golden rule with this type of insurance still holds: don't buy it from a travel agent as part of a package. Cover sold this way is often expensive and, warns new research from the consumer body Which?, may be sold without the right questions being asked. For example, customers with pre-existing medical conditions, or ones who will be doing dangerous sports, may find their claims are turned down because of policy exclusions that weren't highlighted at the outset.

Since banks and insurers are regulated by the Financial Services Authority, the City watchdog, people sold an unsuitable travel policy by these companies can go to the Financial Ombudsman Service for redress. At present, this is not the case with travel agents.

Always check that your travel policy is right for your trip, and shop around on price. "Some insurers will even waive your excess if you tell them you hold an EHIC," Mr Mason adds.

Whatever you do, don't join the ranks of the 2.5 million Britons who, reports online insurer Swiftcover.com, travelled without insurance last year - the medical bills could be daunting.

Many people ignore travel policies because they think they have adequate cover elsewhere - on their home insurance, current account or credit card.

But Robin Reames of Swiftcover warns that household policies do not always cover medical expenses while abroad; won't pay out for a cancelled trip; and don't always cover loss or theft of personal possessions.

"Even with an 'all risks' level of cover on a household policy - where it is possible to claim for items that are lost, stolen or damaged abroad - this often affects the no-claims discount."

The cover provided by banks, he adds, can be limited, covering medical expenses only. And while some credit cards now offer "free" travel insurance, customers usually have to pay a card fee elsewhere for these additional services.