For those looking for a second home, a holiday property could be the ideal investment. Not only can you enjoy a rental yield, but you can also use it as a homely place to relax on holiday.
However, like all investments, it does come with costs. While not mandatory, insurance expenses should be considered, or you could be left with serious costs if something goes wrong.
In addition, investors looking to list their holiday homes online, with sites such as Airbnb, will need to consider insurance too.
It is vital to remember that second homes, like holiday houses, do not qualify for standard home insurance. This is because the risk involved when insuring a second home is different. For example, a holiday home is more likely to be empty for a number of days, leaving it at greater risk of burglary or a burst pipe.
This is why insurers have designed a specific holiday home insurance for these properties. Just like home insurance, it can cover buildings or contents. Buildings cover will cover the cost for damage to your property, while contents cover will insure items within your home.
While holiday let insurance is not compulsory, mortgage lenders require their borrowers to take out a policy on their second home. However, even if you do not need to take out an insurance policy it could be worth considering.
Some might want to consider their location before seeking their buildings cover. For example, a house on some UK coasts could be specifically vulnerable to flooding and therefore requires this specific cover. Likewise, a holiday home in California could be specifically insured against fire damage.
Contents cover, meanwhile, can be considered if your holiday home contains expensive items. If you decide to let your holiday home for some extra money, then it could be responsible to ensure your items are protected when used by other guests.
In addition to these two areas, holiday homeowners might also want to consider other specialist cover, especially if they are letting their home out to other guests. Public liability cover, for example, is one area of specialist cover. In the instance that your guests legally claim against you if they are injured in your property, then this policy will cover any legal fees you might incur.
Compared to standard home insurance policies, many holiday let insurance policies are more expensive since the property is not occupied all year round. However, like all insurance premiums, the cost of your holiday let insurance will depend on a variety of factors. These may include the crime statistics of your holiday home’s location, its size, and the value of the contents in your home among other variables.
While holiday let insurance can be more expensive than a standard home insurance policy, there are ways to bring your premiums down.
As mentioned in our other insurance guides, you may wish to increase your excess, pay your insurance annually and shop around to lower your insurance premium.
Otherwise, for holiday let insurance, you can improve the security on the property and make sure it is consistently maintained to try to lower your premium.
Those who plan to Airbnb their holiday home might have been enticed by its free AirCover protection programme. However, it is key to remember that this is not an insurance policy, and is therefore not under the watch of the Financial Conduct Authority (FCA). In other words, it means Airbnb hosts cannot refer a dispute to the Financial Ombudsman Service if Airbnb does not accept your claim.
Aircover for hosts includes three main areas of cover.
All three main areas of cover can pay out a maximum of $1 million, or nearly £835,000 at the time of writing. Aircover also offers new coverage for other claims such as pet damage and deep cleaning.
There are some gaps in this protection scheme, such as theft of your own belongings and damage caused by natural disasters.
Instead of solely relying on Aircover, Airbnb hosts can take out a more comprehensive holiday let policy.
While some hosts can take out a holiday let insurance policy, it becomes more complicated for other insurers. For example, your Airbnb may not qualify for holiday let insurance because it is your primary residence.
This is why some insurers offer Airbnb specific insurance products.
If you intend to rent out your holiday home, then it could be worth considering public liability insurance. Remember, public liability insurance protects your legal costs, or compensation, if your guest takes you to court. In the case of a holiday let, this could be an injury sustained in the property, or if their belongings were stolen.
If you do not plan to let your holiday home, then public liability insurance may not be required.
Yes. Various policies will differ, but some insurers will even offer cover for cancelled bookings due to a natural disaster.
In the UK you can buy insurance for holiday homes based in a variety of countries, such as France, Spain and Italy. In addition, some property owners will also be able to compare these policies with local insurance quotes to find the best deal possible.
Of course, one of the key benefits of opting for a UK-based insurer is that all your paperwork and your claim can be made in English.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.