Travel insurance can pay for lost luggage and other valuables, as well as accidents or emergency medical bills. Always check what is and isn’t covered.

If you travel without travel insurance, you run the risk of losing out if things go wrong. With about a third of recorded claims involving medical bills, this is by far the most common travel insurance claim. Other common claims are for lost or stolen baggage, cancellation of flights, lost or stolen money, and travel delay.

If you are a UK resident you are entitled to free or reduced-cost, State-provided healthcare when visiting a European Union (EU) country as long as you have the necessary European Health Insurance Card (EHIC). In many other countries, outside the EU, healthcare can be very expensive. But you should remember that the EHIC is not a substitute for travel insurance, as it only covers you for when you are ill.

Most travel insurance plans will cover medical bills for £1m, and often more, as well as pay for an emergency air ambulance to bring you home for treatment in the UK. Travel insurance can also cover you against other mishaps while you're abroad, from theft to flight delays. Most policies have a standard excess charge which means you agree to pay the first part of any claim, for example the first £50 or £100. If you agree to pay a higher excess you might get a cheaper policy. But beware – some policies charge an excess per clause rather than one overall.

You could be offered travel insurance by the travel agent where you book your holiday. Or you may find that when booking your flights, the airline has automatically added travel insurance for you. You don't have to take the insurance offered – you can opt out of it and use your own if you already have it or buy it separately. If you do decide to take the insurance offered, make sure you find out what's covered and what isn't by reading the key policy information. Make sure you get one that's right for you.

Find out whether your employer offers travel insurance as part of your benefits package. You may have some kind of ‘free’ travel insurance through your credit card or bank. However, check what it covers, as it may only cover certain things and only up to a certain amount.

Make sure you read the policy summary to see what is and isn’t covered by the policy – there are bound to be some areas excluded from cover. For example, some policies do not cover scheduled airline failures, civil unrest or terrorist attacks. If you have a policy which doesn’t cover these risks, you can take out separate insurance.

You won't usually be covered for medical conditions you already have, or may have to pay extra to get them covered. If you don’t disclose those medical conditions, any claims that you make may be rejected because you didn’t tell the insurance company about them. If relevant, you should also check whether your policy covers cancelling your holiday when a relative or friend falls ill, and whether you need to keep your insurance company informed about ill relatives/friends. Always ask if you're in doubt. Travelling against a doctor's advice may also invalidate your insurance cover.

The number of confirmed cases of swine flu (H1N1) across the world continues to grow. You should check your insurance policy documents carefully to make sure you understand what you are covered for, the level of cover and any limitations that apply. You should also make sure that you have the supporting documentation to make a claim (such as your unique ID number generated by the National Flu Service, together with the label on your anti-flu drugs as proof of diagnosis to validate a travel insurance claim). For more information see the Foreign & Commonwealth Office's swine flu page.

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1. Read the paperwork and ask questions if you don't understand anything.
2. Make sure you check what you're covered or not covered for.
3. Tell the insurance company if you have any existing medical conditions.
4. Find out if your employer provides health insurance as part of your benefits package.
5. Don't be pressurised to take travel insurance from your travel agent – you don't have to, and other policies may be more suitable for you.