Do you need traveller’s insurance? How to avoid high insurance premiums

Intense competition has driven down the cost of insurance for most travellers. But people whose age, health or activities do not fit the norm can pay many times more.

Insurers do not set premiums high because they are vindictive or uncaring, but because of the arithmetic involving historical data. Insurance works by averaging out risk across a large number of participants. In a typical year, few travellers claim. Most of the claims that are made prove relatively inexpensive for the insurer. A tiny proportion of travellers cost the firm a fortune: for medical claims that involve helicopters, ambulances and/or treatment in high-cost countries such as the US; and for cancellation of high-value bookings.

Very roughly, the amount you pay for travel cover is the predicted total payout divided by the likely number of customers – along with a modest profit for the insurers and the underwriters. But some holidaymakers attract much higher premiums. The old and the ill (particularly with conditions affecting breathing or the heart) are more likely to claim. The sums involved when they do tend to be higher than average.

If you find yourself in one of those high-risk categories, what should you do? One option is rationally to forgo insurance and visit only countries where British tourists get free or heavily reduced health care.

You can self-insure for smaller financial risks, such as the cost of a missed departure, bag theft or, heaven forbid, repatriation of one's remains – and stick to the European Union or non-EU nations with reciprocal health-care cover, such as Barbados, Australia and New Zealand. You remove the biggest insurance risk, in the shape of expensive medical treatment.

Anyone in good shape and blessed with youth might want to travel far and wide now, while insurance is cheap, and save the "safe" destinations for when you, too, are old and/or frail.