You suffer intermittently from depression. You go on holiday with your family, hoping you will feel better as a result. While abroad you suffer a severe bout of depression, end up in hospital and you and your family want to come home. Will your travel insurance cover the cost?

The answer is probably not. One of the exclusions of many travel insurance policies is mental illness, along with illness arising from drug or alcohol abuse.

Or you are mugged while on holiday. You are knocked to the ground, your handbag with passport, tickets and cash taken and, worse, your assailants forcibly remove the rings from your fingers, including your engagement ring. It is worth £1,000. Are you fully covered?

Almost certainly not. Most travel insurance policies carry a limit on the value of individual items of £200£300, and a limit for loss of passport, tickets, cash and credit cards, which can range from £200 for everything to about £1,000, based on items individually claimed for from insurance companies. There is also an excess (the amount you pay before your claim kicks in) in the region of £25£50, and in some policies this is charged twice, once for cash and once for baggage or other property.

People going on sun holidays are usually required by the operator to take out travel insurance, either that sold by the operator or one offered by the travel agent. Some travel companies, notably Sunworld and Corona, charge an "administration fee" if clients take out insurance from another company.

Such policies cost between £24 and £28 per adult for a two-week stay in Europe, with half-price cover for children. So a family of two adults and two children would pay between £72 and £84 for travel insurance.

These policies routinely cover cancellation due to illness or death of yourself or a close relative, emergency medical treatment including repatriation, compensation for death or serious injury, public liability, the loss or robbery of baggage and personal possessions, and compensation for delays of more than 12 hours.

However, a number of circumstances and items are excluded from cover, some of which, at first glance, seem bizarre. For example, you are likely not to be covered if engaged in certain sports deemed by the insurance company to be dangerous. If you want to go scuba-diving, for example, check first if you are insured.

Certain items essential to the personal comfort of the wearer are also usually excluded from holiday insurance cover for loss or damage. These include spectacles, contact lenses, hearing aids and dentures. Seamus Glynn, managing director of Sunworld, says that the insurance of these items is open to abuse, as they can be claimed for by people who lost or damaged them before going on holiday.

He stresses that the main aim of travel insurance is to ensure that people are properly looked after in the event of illness or accident. "That is much more important than things to do with property," he says.

His company is one of those which charges an administration fee if people opt not to take out its travel insurance, except where they have an annual policy. Sunworld charges £6 to clients who opt for an alternative single trip policy. Asked to justify the "administration fee", he acknowledges that Sunworld makes a profit from selling travel insurance, but says that a substantial proportion of this profit goes to providing a high level of service to people who run into difficulties while abroad with them. This level of service is available to all clients, whether they had have Sunworld insurance or not. "If we did not charge this the clients with Sunworld insurance would be subsidising those without," he says. However, it could be argued that this service is part of Sunworld's running costs, and should be built into its holiday prices.

Asked why the charge is not levied on those with annual travel insurance, he sys that they are often regular travellers who travel for business reasons, and already have substantial back-up systems in place for emergencies.

Travellers should also be aware that most travel insurance does not offer cover on a replacement or "new for old" basis, although home insurance policies generally do. If, for example, a camera is stolen which is 10 years old but in perfect working order, it is of little use to the insured to have "wear and tear" deducted from the amount paid.

Such a policy does not seem to be very good value for the best part of £100 for a family of four, though loss adjusters Francis Charsley insist that it is, pointing out that most claims are for delays and disruption, or for accident and illness.

But with many people now taking more than one holiday abroad a year, including short breaks, annual travel insurance seems both advisable and better value. Most insurance companies and the major banks now offer such a policy.

Insurance brokerage Coyle Hamilton is one company offering annual travel insurance. For £105, a family of two adults and an unlimited number of children under 18 can get insurance for 180 days abroad a year, 60 of which can be in one trip. There are extra premiums for winter sports.

This offers cover for cancellation and curtailment, medical expenses up to £2 million and the usual cover for loss of baggage, passport, etc, including replacement on a new-for-old basis. The excess is £25. Those of us who wear glasses will be glad to hear that this policy also covers loss or breakage of spectacles and hearing aids.

Most policies for a two-week stay in Europe cost £24-£28 per adult, and half that again per child