If you had failed to take out insurance before going on holiday, you would either be left stranded and sick or you personally would have to fork out thousands of pounds for help and treatment. Many people dont bother getting holiday insurance, especially if they are holidaying within Europe. You should be aware though that your European Health Card wont be enough if you have very serious accident. Trying to claim money back from the NHS can also be an unnecessarily long and drawn out process.
Travelling further afield, particularly to America, usually encourages people to take out insurance. But, sure enough people will buy based on price alone and the chosen cover isnt comprehensive enough to insure you against injury from the kind of activities you will be engaged in.
This makes getting the correct amount of cover really important. Take backpackers for example. They tend to do some crazy, high-risk activities, such as jumping out of planes and off of bridges, rafting down rapids and leaving their belongings in usually unsecured backpacks in unsecured hostels. If you are going backpacking make sure you buy backpacker-specific insurance.
Winter sports also have a high injury rate and the accompanying treatment can be particularly expensive. Many standard insurance policies wont cover you in certain circumstances such as in off-piste areas or on particularly challenging pistes. So again, you will need to get specific insurance. This then calls into question annual policies. Should you get one with a high level of cover if you only ski every other year? Or should you just buy a policy for a specific holiday? However, annual policies do tend to be cheaper.
Some insurers allow you to bolt on extras for specific high-risk holidays. If activity holidays are an infrequent occurrence for you then this will save you money. Furthermore, it could also be cheaper to get an annual ski policy if you are skiing for at least seven days a year.
In recent years, the number of holiday and flight companies that have gone under has increased. Be sure to check that your holiday insurance covers you in the event of company collapse or bankruptcy.