These blogs are written by third party guest authors to help provide additional insight and perspective.
As Prime Minister Boris Johnson calls on international tourists to visit the UK and enjoy the sights and sounds of one of the most open countries in Europe, investing in a holiday let could make perfect business sense.
So you’ve done your research, chosen your property, your mortgage has been agreed and you are close to exchange of contracts, it’s now time to think about the insurance.
I’m sure you are all familiar with home insurance and in some ways insurance for holiday lets is very similar, but there are a few extra covers and features that a good policy should provide to ensure you’ve got the best cover for your circumstances.
As with home insurance policies, cover is provided for the buildings of the property. To avoid underinsurance, it’s important to ensure that your buildings are insured for an amount adequate to completely rebuild your property and any outbuildings. This needs to include costs for clearing the site and labour and materials. Recently construction and material costs have hit an all-time high in the UK, so take your time here to consider everything.
Your mortgage valuation survey often provides a rebuild figure for insurance purposes, alternatively, you can seek guidance from the ABI.
Contents insurance offered on a new for old basis, will provide you with the most comprehensive cover. When calculating your contents sum insured, you need to think about the cost of replacing everything as new. You may find it useful to make a contents checklist as you purchase items to furnish your property, making it easier to total up when needed.
Accidental damage by guests
Any good insurance policy will include this cover in the contents section. This protects your items should they be accidentally damaged by your guests. But do check your policy wording as this cover can often be excluded or terms imposed. As part of your handover process, it is a good idea to check items for damage as your guests may not always own up to any mishaps.
Theft, including theft by guests
Again, most good policies will include this cover in the contents section but it’s always good practice to check the terms and conditions. After each guest has checked out, use your contents checklist to ensure all your items are where they should be.
Property of your guests
This provides extra cover for your guests’ property should they not have insurance for their own belongings. It is always a good idea to recommend that your guests arrange their own travel insurance when booking, to reduce claims to your policy.
Theft or loss of keys
Most good policies will include cover for your keys should they be lost or stolen. Cover includes replacement locks and locksmith call-out charges. A useful cover should your guests run into a problem during their stay.
Liability to others including guests
Some holiday let mortgage lenders and letting agents insist on liability cover being built into the policy, often requiring a specific limit of cover. Most good holiday let policies include this cover automatically but be sure to check the limit is adequate.
Liability cover protects you and your business should somebody be injured, or their property is damaged whilst on your premises and it is proven that you are to blame. Making sure your property is well maintained and is compliant with regulations will reduce this risk.
A compulsory form of insurance if you have employees, so if you employ the services of a cleaner or gardener for example, you would need to display proof that this cover is in place. A good policy would automatically include this cover but it is always best to check.
Loss of income
It’s important to take your time to ensure you have the right cover here. Loss of income protects your earnings if you have to cancel bookings following damage to your property that is insured under the policy. An example of this would be a fire, should you make a successful claim under the buildings or contents section of your policy, loss of income would provide cover for your loss of rental income until the property is repaired and ready to be let again.
There are two factors to consider, the indemnity period and sum insured. The indemnity period is the length of time payments for loss of income will be paid. So it’s important to consider the length of time it could take for your property to be repaired and be ready to accept guests again. A good policy will provide an indemnity period that gives enough time for this to happen.
The sum insured is the total amount of payments that will be made, so again it’s important to ensure it is adequate to cover your loss of earnings for the indemnity period chosen. For example, if you choose a 24 month indemnity period the sum insured needs to be adequate to cover 24 months of lost rent.
Although life has returned to normal after the Covid-19 pandemic, it is still worth noting that cancellation due to Covid or ill-health of your guests is not covered under a loss of income policy. So having clear booking instructions and terms and conditions surrounding cancellations by guests is important. It is also a good idea to recommend that your guests take out their own travel insurance to cover this.
A good holiday home policy will have reasonable unoccupancy terms. These terms are imposed by your insurer during periods when the property is not let and is unoccupied. An example could be an increased excess if the premises are unoccupied and not inspected at 14-day intervals. This is simple to comply with and by inspecting the property and creating a log of visits you can satisfy the insurer’s requirements. The inspection doesn’t have to be done by you, you could employ the services of a letting agent or maybe a cleaner or other employee. Be sure to check your unoccupancy terms as some are not as favourable as this and can require additional attention to ensure you have full cover.
There are lots of policies to consider for holiday lets, so be sure to read through the terms and conditions, paying particular attention to the points raised, so that you and your guests are well looked after.
Since 1975, Ipswich-based Ryan’s has been providing customers with insurance and risk management solutions for a wide range of insurance products. They have specialist divisions for both personal and business insurance to meet the specific needs of clients, helping untangle complications and making things simple.
Guest post supplied by Ryan’s. By publishing and hosting information from guest authors on the Suffolk Building Society website this does not constitute an affiliation with, nor a recommendation of, any third party organisation. We recommend that if the content of this article applies to you, or if you require further information on the particular topic it raises, that you seek specialist advice.