At last, holiday insurance that dares to take on the risk of terrorism

A travel insurance product without any of the usual exemptions for terror strikes or pre-existing health conditions has been launched this week to help families of British travellers who die abroad.

The move follows concerns over the perceived inadequacy of Chancellor Gordon Brown's £1m charitable fund for victims of terrorist attacks abroad, as unveiled in last month's Budget.

The new policy, developed by World-Assure and underwritten by Lloyd's of London, is designed to cover the costs of repatriation of victims' bodies and of associated costs incurred on the ground.

It should help travellers caught up in tragedies ranging from al-Qaeda terror attacks to tsunamis, as well as those whose existing insurance policies did not cover them because they had undisclosed health problems or took part in dangerous sports.

The absence of provision for travellers who die abroad came to the fore last year when families of Britons caught up in terrorist atrocities overseas were not covered under travel insurance policies and received little or no help from the government.

'It's the right way forward,' says Trevor Lakin, a 56-year-old company director from Lincolnshire, who lost his 28-year-old son, Jeremy, when terrorists struck the Red Sea resort of Sharm el-Sheikh last year. 'We were left to fend for ourselves. We, together with all the other families, had to face the prospect of doing everything ourselves and paying for it out of our own pockets - from flights out to Egypt to phone calls to desperate loved ones from hotels when we were there. People felt totally isolated.'

Jeremy Lakin died with his girlfriend, Annalie Vickers, and eight other Britons when three bombs ripped through the resort last July.

The government's own criminal injuries scheme is limited to the victims of attacks on UK soil, and insurance policies generally have terrorist exclusions. Jeremy Lakin, who was going on a diving holiday, had an annual travel policy through Axa PPP and a specialist policy with Fortis Insurance. Neither paid out, but Fortis made an ex gratia payment of £600.

The WorldAssure product features a single exclusion for 'nuclear, chemical and biological terrorism'. According to the company, that situation is uninsurable as 'bodies have to be dealt with on the ground'.

By contrast, Ryanair's insurance policy, for example, contains 17 exclusions. One crucial difference between the WorldAssure product and other policies is that it is being marketed directly to the travel industry - to tour operators and airlines.

The policy will be administered through a 24-hour call centre and would cost 'pence rather than pounds'. The cost of the policy will be included in the price of the ticket.

Derek Moore, a member of the Association of Independent Tour Operators, calls it 'an interesting idea, especially for people whose existing policy does not cover the situation'. But he adds: 'Don't assume that your policy doesn't.'

Moore is director of Explore, which specialises in providing adventure holidays in developing countries; its own policy has no exclusions (except for 'nuclear, chemical and biological terrorism').

James Kindleysides, WorldAssure's managing director, points out that some 5,000 British travellers die abroad every year and many have no cover. 'Most people don't give it a second thought, but those who do assume that their travel insurance will cover the cost of an accident, injury or death while overseas. But in the case of death it just isn't true,' he says.

He argues that the industry has 'a duty of care' to incorporate such an indemnity into all travel arrangements and that industry-wide take-up would mean costs would be 'minuscule'.

As for the victims of terrorist strikes, Gordon Brown has now proposed a £1m charitable fund as 'an initial endowment', whether attacks take place at home or abroad. Campaigners, including Trevor Lakin and Tobias Elwood, the Conservative MP for Bournemouth East whose brother, Jonathan, was killed in the October 2002 Bali bombings, complain that the money is not enough and that the proposals are lacking in detail.

The day before the Budget, Foreign Secretary Jack Straw launched a guide for people travelling abroad where he spelt out the limits of the Foreign & Commonwealth Office's role. 'People need to be clear what we cannot do,' he told the House of Commons. 'We cannot get people out of jail; nor can we pay their hospital bills.'

However, Straw faces growing demands to provide for British travellers. 'Over £50m was rightly given to those affected by the 7/7 bombings, but not one penny is available to any Briton caught up in a terrorist incident abroad,' said Elwood, who flew out to Bali with his sister to identify and reclaim Jonathan's body. 'I ended up putting the nails in his coffin because there was no one there to do it,' he recalls. Elwood says that the only support they received came from the local Rotary Club.

As well as calling on the government to put in place an adequate fund, Elwood argues that insurers should not rely on terrorist exclusions.

A pensioner who never returned home

Stanley and Patricia Jones flew out to Alta Loma, in east Los Angeles, for a month's holiday to visit his brothers last December. But what should have been a relaxing Christmas break exchanging the bracing Merseyside climate for a couple of weeks in the Californian sun turned into a nightmare.

Eighty-year-old Stanley suffered a stroke, was forced to spend the best part of a month in hospital and, sadly, the father-of-two from Tranmere on the Wirral did not pull through. 'When you live in another country and the phone rings, you tend to think "what's happened at home?",' recalls Stanley's son Alan, a 58-year-old glazier who now lives in Scandinavia. 'When you have parents in their eighties, you know this is the thing that could happen any time so I can't say that I was shocked.'

What did shock the family was the fact that his Marks & Spencer travel insurance policy did not cover him because, like many policies, it featured an exclusion for undisclosed pre-existing medical conditions. Stanley had suffered from high blood pressure. An M&S spokeswoman said it was 'incredibly sad' but 'we were unable to pay out on the claim'. 'Turning down a claim is something we do rarely and never without good reason,' she added.

'My mother has aged 20 years in the past three months,' Alan Jones says. 'The trauma of his death and having to sort out the problems has worn her out.' The family was faced with a medical bill for £250,000 and they could not afford to bring his body back home.

'If someone sells insurance to someone who is 80 years old, they ought to make sure they know what they are signing up to,' his son says.