Do you need specialist holiday home insurance? To uncover the answer, it might be helpful to consider some of the basic principles of property insurance.
If you are a property owner, there is at least one simple and compelling reason for your insuring it:
- you are likely to have made a significant investment in its purchase;
- the building and its contents are vulnerable to a range of risks and perils, with the possibility of considerable damage or everything being totally destroyed;
- without property insurance, you have no financial help in repairing the damage or rebuilding the property; so
- you risk the loss of every penny you have invested.
Despite the power of this argument, the Association of British Insurers (ABI) has estimated that more than 9 million households in the UK have no building insurance and that more than 6 million have no contents insurance.
Although there are no directly comparable figures about the insurance of UK holiday home, there is every reason to believe that there are similar lapses by owners failing to insure their property.
If you are buying any property with the help of a mortgage, the lender is almost certain to insist that you have building insurance to protect the structure and fabric of the property – the lender, of course, has an interest in safeguarding the security of the loan.
The same principles apply to the purchase of a second or holiday home.
It is important to bear in mind, however, that a mortgage lender is interested in safeguarding the outstanding balance of any loan advanced and has no reason to take into account the current market value of the property. In other words, the requirement imposed as a condition of a mortgage may be insufficient for the protection of the property and contents you own.
Put in simple terms, you might be required to arrange a total sum insured that is equivalent to the amount of your mortgage balance, whilst the sum insured for completely rebuilding the property in the event of a total loss may be considerably more – it is the latter, of course, which needs to inform your selection of the total sum insured.
UK holiday homes
Having established that there is a compelling reason for insuring your property and recognising that the level of insurance required by your mortgage lender may be insufficient to provide the protection you need, where does that leave the question of insurance for your holiday home?
Going back to basics once again, insurance is all about risk. And risks are clearly influenced by the way in which a property is used. Your main residence is used in one way, as your permanent home, whilst any second home is used in another way – as a holiday home.
That difference in use is critical as far as any insurer is concerned and might be illustrated by reference to just two amongst a number of important aspects. Unlike your main home, for example, your holiday home:
- might be let to paying tenants or other visitors at various times during the year; and
- at other times of the year, it might stand empty and unoccupied altogether.
Both sets of circumstances leave your second home more vulnerable to risks to which an owner occupied home is not exposed.
For reasons such as this, specialist holiday home insurance is required and standard home insurance is unlikely to suffice. Indeed, if you are relying upon standard home insurance, make a claim, and it is subsequently discovered that the property is being used as a holiday home, you might find your claim rejected.
To avoid any such unhappy conclusion, you might want to contact us here at Cover4LetProperty to arrange specialist insurance for your holiday home.
We have also produced a Guide to UK Holiday Homes which provides some useful information, too.
Specialist holiday home shares a principal concern with your standard home insurance in the protection of the building and its contents. The building sum insured needs to be sufficient to cover the cost of reconstructing the property if it is a total loss – razed to the ground in a fire, for instance – whilst contents insurance also needs to reflect the cost of repairing or replacing items that are damaged, lost or stolen. In both cases, it is important to avoid the twin risks of being either over or underinsured.
With respect to insurance of the contents, you might want to consider the inclusion of all-risks protection for accidental damage and bear in mind that some policies offer settlement of damaged or lost contents on the basis of “new for “, whilst others deduct a value for depreciation or “wear and tear”.
Public liability insurance is typically included in your holiday home cover and this may be especially important if the property is to be let to tenants. If a tenant, one of their visitors or a member of the public suffers a personal injury or has their property damage and claims that you have been negligent as the property owner, you may face a substantial claim for damages.