Flybe says it's the first airline in the world to make available Volcanic Ash Insurance.
The policies are underwritten by the firm's travel insurance partner, Chartis, and will offer extra protection on top of that required under EU law.
Flybe's chief commercial officer Mike Rutter says the new policies are designed to give travellers extra peace of mind, following the recent eruption in Iceland.
The insurance will reimburse customers for any holiday costs already paid if a flight is cancelled prior to departure, or delayed for more than 24 hours if airspace is closed by authorities.
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