This is the biggest hazard of DIY and doesn't just apply to the airline going bust - ask easyjet and Eurostar passengers today!

All policies are different and seem to change from year to year so you must check the policy document before buying, thankfully this is easy as the companies who deal on line make the document available to read, usually as a PDF file you can downline. Do not rely on borrowing one from someone else as conditions can change during the year - I had an annual policy from M&S that did cover this but they dropped it fom new policies whilst mine was still in force.

First section to check is "Cancellation" - does it give a clear yes or no? If it doesn't then look in the Exclusions which are usually listed at the end. Another handy way to check is to search the document for the words "airline failure" , click on the binocular icon in Adobe PDF reader or use CTRL+F in Microsoft IE or Word.

If you can't find clear wording that you are covered it's best to asume that you're not. But that's just the basic policy, some offer "Scheduled Airline Failure" cover as on option for a relatively small amount more - but again read the words, it may cover you for them going bust but not for throwing the towel in on a difficult day. It is also possible to buy SAF cover completely seperately from the main policy but you're getting into murky waters if you have to deal with two companies for one claim. The other question to ask is whether they cover you for all costs or just the lost fares. You may find that they would pay out for the fares but not prepaid hotels etc. leaving you with the options of losing that money or booking new flights at probably much higher prices.

I normally get around the prepaid hotel problem by booking hotels that don't want money up front, but if you need car hire that isn't as easy.

THanks for that, much appreciated

The other thing you have to consider whilst doing DIY is that even if your flight is covered in the policy, in the event of your flight being cancelled you won't be able to recover the cost of your accomodation if you can't get an alternative flight.

I'll be monitoring the easyjet site closely as I'm due to fly DIY to Prague on NYEve and if the present weather continues and the flight's cancelled, I have an hotel waiting for me which I can't get to and probably won't be able to get my money back.