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Thomas Cook collapse: what it means for your travel insurance

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The collapse of British travel company Thomas Cook has left up to 600,000 travellers stranded and out of pocket.

Labelled the "biggest collapse of a UK holiday package company", tourists have been reportedly locked out of hotel rooms and "held hostage" by resorts seeking compensation.

The collapse is nothing short of a catastrophe for thousands of travellers, says Natalie Ball, director of Comparetravelinsurance.com.au.

"While Thomas Cook customers currently abroad are scheduled to return home via replacement flights, those with future travel plans will no doubt be disappointed and frustrated by their abruptly cancelled holidays."

thomas cook collapse

Those stranded on holiday are advised to speak with their airline or accommodation provider directly, and to hold onto receipts for any additional fees incurred as a result of the collapse.

There is a still a lot of uncertainty facing Australian travellers, she says.

"Our advice would be to keep communication channels open with the relevant travel providers, minimise any additional expenses and hang on to your receipts."

The collapse follows a series of travel provider bust-ups in recent years.

Last December, international accommodation site HotelQuickly ruined dozens of Christmas holidays by cancelling bookings in the last minute. Affected customers were offered vouchers as compensation which later turned out to be invalid.

The same month travel company Bestjet collapsed, leaving hundreds of customers furious and out of pocket.

Travel agency busts - will travel insurance cover you?

You've booked and paid for your holiday package and your travel agent goes belly-up; your travel insurance has you covered right? Unlikely.

Travel insurance does not usually provide cover against insolvency or bankruptcy of a travel agent, Ball warns.

"The majority of travellers wrongly assume that travel insurance will reimburse you for loss of prepaid expenses regardless of the reason," she says.

"However, there are only a few insurers that will cover you for the insolvency of a travel agent.

"While most insurers don't cover insolvency, you will find that some providers do offer some benefit in case of the financial default of an airline, tour operator or accommodation provider."

thomas cook collapse

Are Aussies affected by Thomas Cook collapse?

Thomas Cook ceased its Australian operations earlier this year, yet some Aussies are still likely to be affected by the collapse, particularly those among the British expat community.

As one of the world's oldest and most high-profile travel brands, Australians travelling to or in Europe are could have booked local flights and accommodation with Thomas Cook airlines and resorts.

Thomas Cook's British customers are protected by the government-run travel insurance program, which makes sure holidaymakers can get home if a British-based tour operator goes under while they are abroad.

However, resolutions are not so clear for affected Australians.

Ball says that travellers seeking reimbursement for their cancelled holidays should do so through their credit card company or financial institution.

"Some banks allow a 'chargeback' if you pay for something on your credit card and don't actually end up receiving the product or service.

"A chargeback from your credit card issuer gives you a refund when you've been wronged in a transaction and the retailer doesn't provide a refund."

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