Naomi Campbell might be the highest-profile casualty of the trouble at London Heathrow's new Terminal 5, but the notoriously testy supermodel - who had to be led away in handcuffs from her Los Angeles-bound flight last week after a kerfuffle over lost luggage - surely isn't the only British Airways customer who's spitting mad. At least 20,000 bags have been lost through system glitches since the terminal opened last month. They're piling up in corners or being shuffled like cattle to sorting stations across Europe and the U.S.

On this side of the pond, about 3,000 flights were scrapped last week by American Airlines, with more cancellations expected as other U.S. carriers clear their backlog of technical inspections.

And then there's Oasis Hong Kong Airlines, whose strategy of going head to head with Cathay Pacific had made flying to Hong Kong from Vancouver ridiculously cheap - at one point, just over $500 return. The upstart airline's demise this month capped a series of recent airline bankruptcies - including those of Aloha, ATA, Skybus and Frontier in the U.S. - that left passengers stranded and holidays ruined.

Some would argue that given the magnitude of these woes and the sheer speed at which travel plans are unravelling around the world, there has never been a better time to buy travel insurance. But whether they've been stung by puny payouts, high premiums or loopholes in the fine print, many passengers continue to play the odds.

About 3.8 million trip policies worth more than $345-million were sold by Canada's eight largest insurers in 2006, according to the Conference Board of Canada. It's a conservative figure, since untold numbers buy trip insurance from foreign providers or comparison-shopping websites such as Kanetix.ca or Squaremouth.com. Still, a recent survey by AIG Travel Guard Canada suggests that one in five Canadians travels uninsured. Others say they rely on credit-card insurance or employee benefits to protect them when they travel - not realizing the coverage they get is spotty at best.

"People often think of it as a case of 'fries with that,' " says Joel Donin, AIG's Toronto-based marketing director. "The big buy is the trip, and then someone offers travel insurance and they think, 'I have it on my credit card, so why bother?' "

In fact, credit cards cover accidents but typically exclude illness, which helps if you break a leg while skiing but not if you have a heart attack on the green. And usually you're reimbursed only for what was purchased with the card.

Meanwhile, workplace insurance benefits usually don't cover things such as lost luggage or interrupted trips, and your policy may not cover family members.

Generally, medical policies are good for illness, accidents and emergency evacuation. They're sold separately or wrapped into comprehensive packages that, at a minimum, consist of trip-cancellation and trip-delay protection for circumstances ranging from poor weather to airport delays to aircraft problems; trip-interruption protection for vacations cut short by a family emergency; and usually some indemnity for lost luggage.

But travel insurers have begun playing around with the traditional formulas. They're paying out higher claims and closing those maddening loopholes - you can now recoup the cost of the airfare bundled with an all-inclusive cruise package, for instance, whereas before you would be refunded only for the cruise portion.

They're also plumping policies with à la carte riders, such as the ability to cancel a trip for any reason - no questions asked (AIG Travel Guard and TravelSafe Insurance); the option to be airlifted to the hospital of your choice, anywhere in the world, not just the nearest one (AIG Travel Guard, MedJet Assistance, On Call International); or to reschedule because of a terrorist threat.

And they're crafting specialty policies for the discerning or harder-to-insure: golfers, extreme sports enthusiasts (World Nomads, Seven Corners and Patriot America), families (Travelex insures children under 16 gratis), business travellers and more. An Olympics package from Seven Corners even covers prepaid event tickets, airfare and accommodations for those heading to Beijing this summer.

Patrick Gallant's golf excursion with 20 buddies from Moncton, N.B., last month is a prime illustration of the need for such specialty policies. En route to the links of Myrtle Beach, S.C., Gallant's $1,500 collection of left-handed clubs, clothes, gloves, balls and a friend's borrowed bag all went astray in Montreal.

The 52-year-old bank manager braced himself for an ugly fight at the airport in Myrtle Beach with United Airlines, which, like most carriers, requires golfers to claim the loss as soon as they disembark. In the end, however, it took just 30 minutes to process his claim. The airline, which aggressively courts golf tourists, paid for top-of-the-line rentals from a shop in the airport. Gallant didn't miss his tee times, and his own clubs were dropped off at the hotel a couple of days later.

But different airlines treat luggage snafus differently. Two of Gallant's friends flew with Continental Airlines, and when their clubs disappeared for three days, they had to arrange and pay for their own rentals with a nebulous promise of reimbursement.

"Clubs are like a pair of shoes," Gallant sighs. "You don't like the idea of wearing a different pair that's not yours. As a traveller, you shouldn't have to put up with this kind of hassle."
(Incidentally, his golf bag went missing again on the return trip.)

International rules govern airlines' maximum liability for lost luggage and dictate compensation based on a bag's weight. Most airlines pay nothing for big-ticket items such as jewellery, wedding dresses or laptops, and little if anything for sports gear - perhaps $500 to $1,500 for an entire claim, including that expensive set of Hogan irons, which is treated as a single item.

That's where travel insurance steps in.

AIG Travel Guard Canada's Optional Golf Protector reimburses up to $2,500 for lost or damaged golf gear, as well as $500 for non-refundable green fees in the event of illness. Plus, it dispatches a 24-hour concierge service to haggle with airlines over the loss, re-book tee times and recommend cool courses. (An even richer plan for U.S. customers includes health coverage and compensates customers for reservations scuppered by flight delays or bad weather, not just illness.) A similar dynamic exists between airlines and insurers when it comes to natural disasters.

A "forces of nature" clause exempts airlines from liability for weather delays - although many offer assistance. WestJet, for instance, will put you up in a hotel if there's a blizzard, a late-night technical problem or unexpected schedule change, then book you onto the next available flight - either theirs or a competitor's. Meanwhile, Air Canada has just launched an insurance-like product for weather and technical delays called On My Way, which for $25 to $35 offers essentially the same services that WestJet provides as a courtesy.

Travel insurance fills the gap with a range of products for trips cancelled or interrupted because of a host of reasons, including weather. In the past, even if your hurricane-soaked hotel was flattened and awash in filth, you would be on the hook as long as the airline could fly you there. Now, with "destination uninhabitable" coverage from insurers such as CSA Travel Protection, TravelSafe Insurance, M.H. Ross and Travel Insurance Services, you can cancel if it's no longer worth the trip.

As for bankruptcies, like the recent series of them that forced passengers to hurriedly revise their plans or left them stranded far from home, travellers should know that airlines or cruise lines are under no obligation to get them to their destination. If the trip was arranged through a registered travel agent, you'll be reimbursed for the fare - eventually. Credit cards will refund only what was pre-paid with plastic.

TIC Travel Insurance Coordinators, Group Medical Services and AIG Travel Guard Canada are among the few insurers with policies covering bankruptcy. They promise to process a refund immediately to reimburse the maximum declared value of your trip.

Of course, Canadians are concerned more than anything else about medical coverage, says Gregory Ellis, co-founder of kanetix.ca. A day in a U.S. hospital can cost as much as $4,000, to which Ontario's public health insurance contributes just $400 and B.C.'s a paltry $75.

But Ellis says hits to his website's sections on trip-cancellation, baggage and bankruptcy coverage have risen sharply in the past few weeks, as Canadians digest the misfortunes of fellow travellers.

With so many changes in the industry, he advises poring over a policy to ensure that you're not being charged for extras you don't need. The option to cancel at any time, for instance, can add 40 to 50 per cent to the price of a policy.

"You don't need to have your pet flown back to Canada or all these things companies bundle in," he says. "Fundamentally, you want to ensure you've got the basics covered and not pay too much for that."