Holidaymakers have been warned that some travel insurance policies are now so cheap they could prove useless.

There are 30 travel insurers offering single-trip policies for less than £10, according to a report from data firm Defaqto, and one company charges just £5.49.

The report warned that the cover available on such policies could be dangerously inadequate, with insurers imposing strict conditions on claims, particularly for pre-existing medical conditions and lost or stolen baggage.

Defaqto has called on the industry to do more to inform consumers of the potential pitfalls in their policies.

Brian Brown said: “Consumers are being let down by the insurance industry, which has made travel policies jargon-heavy to the point where they can only be compared on price. This, compounded with increased competition, means that too many people are now travelling abroad with inadequate cover. With the continued growth of overseas travel to increasingly exotic places, more people are likely to end up on the wrong side of an insurance claim.

“The insurance industry and the government must do more to ensure that all consumers are aware that when it comes to travel insurance, cheapest is not always best.”

Consumers are often unaware that they must disclose pre-existing medical problems such as asthma, diabetes and high blood pressure, and are then shocked when claims are turned down on this basis.

Baggage claims are another big gripe, with many consumers not realising that their policy may not give them new-for-old cover, and may not replace particularly valuable items unless they can provide original receipts.

Brown said: “Not only is such a clause [specifying original receipts] potentially unenforceable in the eyes of the Ombudsman, it may also be in breach of Financial Services Authority rules since most insurers do not bring it to customers’ attention at the time of purchase as being a significant and unusual exclusion.”

Separately, the Civil Aviation Authority has warned that 18m consumers who put together their own ‘diy’ holidays, rather than buy them through a package firm, may not realise they have limited protection.

When consumers book a package holiday, they are protected by the ATOL licensing scheme if the travel company goes bust. It forces the firm to make alternative arrangements for flights and accommodation, and prevents holidaymakers being stranded abroad.

However, consumers who book their flights and accommodation separately could find they have to fork out for alternative arrangements themselves.

The CAA urged people putting together their own ‘diy’ trips to book with a credit card, which offers protection above £100, or to look for travel insurance that covers insolvency.

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