Travellers enter the twilight zone on holiday cover

Finding the right kind of travel insurance isn't always easy. Do you go for the cheapest policy, insure yourself to the hilt in case of disaster, or buy annual cover? And with a confusing choice of more than 700 different policies from dozens of providers, you could be one of the 15 per cent of holidaymakers who, market researcher Mintel reports, don't take out cover, cross their fingers and hope nothing happens.

Finding the right kind of travel insurance isn't always easy. Do you go for the cheapest policy, insure yourself to the hilt in case of disaster, or buy annual cover? And with a confusing choice of more than 700 different policies from dozens of providers, you could be one of the 15 per cent of holidaymakers who, market researcher Mintel reports, don't take out cover, cross their fingers and hope nothing happens.

That's all very well until crisis strikes. Halifax insurers estimate that British tourists forced to cancel their holidays this year could lose up to £95m because they do not have travel insurance. And given the many airport delays, and accidents or illnesses suffered by holidaymakers overseas, travelling without insurance is not a risk worth taking.

Many people still suppose that a summer holiday bought with a credit card is instantly covered. But only cards at the top of the range - such as American Express Platinum - offer full protection. Barclaycard holders, for example, will find they are covered only if they suffer a serious injury on public transport overseas.

Similarly, relying on home contents insurance to protect expensive items in the event of damage or theft on holiday may not be a good idea. Stuart Glendinning, director of the financial products website Moneysupermarket.com, says: "It's risky to try to build cover from what you have. For instance, people may take a camera abroad believing it to be covered outside of the home, but this is often an optional extra - and people may not check or know if they are covered."

When you've spent time and money hunting for the perfect holiday, the temptation simply to accept the insurance offered by your travel agent can be overwhelming. But this is an expensive mistake that too many of us make, Mr Glendinning adds.

"People shop around for their holiday but when it comes to travel insurance, they become very passive. Their £100 policy may not seem very much compared to a £1,500 holiday, but far better deals are available elsewhere."

That better deal may take the form of an annual policy. Although more than a quarter of us believe we don't go on holiday often enough to require this type of insurance (according to research from Post Office Travel Services), Britons are venturing abroad more frequently than ever before. In fact, we make around 58 million trips overseas each year.

Not only can annual cover save you money, it also means you won't have the bother of taking out insurance each time you travel. And there's no danger you'll forget to arrange cover for that European city break you booked at the last minute.

When you plan your trip, remember that most travel policies will cover medical expenses and cancellation at a basic level, but you will need to check whether other holiday mishaps - for example, theft, muggings, lost luggage or delays at the airport - are also included.

Travel supplements in newspapers and magazines and websites such as Moneysupermarket.com, Find.co.uk and Moneyextra.com will help you find and compare deals from different insurers.

Don't choose a policy on the basis of cost alone; making sure you get the right kind of cover is just as important. Extreme sports such as white-water rafting or abseiling will demand specialist insurance, while even activities like hot air ballooning may not be covered as standard, so bear this in mind if you make a spur-of-the-moment decision to try something different while abroad.

Look also at the policy's excess charges. Be aware that if you are unfortunate enough to break your leg and have your wallet stolen in a mugging, some policies will make one excess charge per incident while others will make one per claim category.

When arranging your policy, you must also tell your insurer about any serious medical conditions you suffer from; failure to do so could see the insurance annulled.

And if you're heading for continental Europe, make sure you fill in your E111 form - available from the post office - to benefit from free or reduced-price emergency medical care in any country in the European Union.

Cheapest under the sun

14 days single-trip cover for a family of four travelling to Spain

Provider Cost

Travel Insurance Web £18.38

24DrTravel Insurance* £20.18

Columbus Direct £24.88

Travelcov.com £25.10

Options Travel Insurance £26

Annual multi-trip cover for a family of four travelling to Europe

Travel Insurance Web £47

Options Travel Insurance £49

Direct Travel Insurance £50

24DrTravel Insurance £53.90

Travsure £60

Source: Moneysupermarket.com

*Excluding cancellation for any reason