If you own a holiday home in the UK, you have the opportunity of earning additional income by letting it out when you are not using it. It’s an opportunity that thousands of owners seem to have seized, according to research conducted by VisitBritain.
Though it’s an attractive proposition, care needs to be taken since letting out a holiday home also comes with various risks – many of which may affect your existing insurance arrangements. Since the second home insurance you have at present may not reflect how you intend to let the property in future, you may want to review your insurance arrangements.
Further discussion may be found in our Guide to UK Holiday Homes.
How holiday home insurance differs from second home insurance
When your holiday home is occupied by paying guests, there are greater risks than when it is used only by you and your family. Let’s consider some of those distinct risks and their impact on UK holiday home insurance.
When your holiday home is regularly let to paying guests, the higher levels of footfall are almost certain to increase general wear and tear on the dwelling and its contents.
When letting your holiday home, maximising your rental income is likely to depend on a more or less constant turnover of short-term rentals. Frequent changes of occupants – not all of whom may pay your home the respect and care it deserves – may heighten the risks of loss and damage.
As the property owner of a holiday home with regular changes of occupant, you may also be held liable if a guest, one of their visitors, a neighbour, or even a member of the public suffers an injury or has their property damaged through some contact with your home.
UK holiday home insurance is designed to help protect you against this distinctive background of risks and differs from standard second home insurance as a result.
Why informing your insurer is important
With any kind of general insurance, you have an obligation to inform your insurer of any change in circumstances – changes in what insurers call “material facts”. UK holiday home insurance is no different.
Because the use of your holiday home by paying guests represents a significant change in the insured risks – a change in the material facts – you should inform your insurer before the property is let to paying guests or begins generating rental income.
Similarly, your insurer will expect to be informed if occupancy patterns change. For example, if circumstances change from an occasional rental during a quiet time of year when you are not using your second home, to its more or less continuous rental as a commercial holiday let.
Do I need specialist holiday let insurance?
Depending on how the property is used, specialist holiday let insurance may provide cover designed for the risks associated with paying guests, including accidental damage, property owners’ liability and periods when the property is unoccupied between bookings.
You may also need to consider any requirements imposed by your mortgage lender. Some residential mortgages and second-home mortgages do not automatically permit short-term holiday letting, and lenders may require you to obtain consent before accepting paying guests. In some cases, a specialist holiday let mortgage may be required.
Before advertising your property or accepting bookings, it is sensible to check both your mortgage conditions and your insurance arrangements to ensure they remain suitable for the way the property will be used. Failure to comply with mortgage conditions or insurance policy requirements could affect your cover or lead to other complications.
Insurance cover, terms, conditions and lending requirements vary, so it is important to check the details that apply to your individual circumstances.
Insurance considerations when letting a holiday home
Your existing holiday home insurance may not automatically provide cover for every risk associated with paying guests. Depending on the insurer and policy, you may need specialist holiday let insurance designed to reflect the way the property is being used. When reviewing your arrangements, you may want to pay particular attention to the following areas of cover below. Cover, limits, exclusions and policy conditions vary between insurers and policies, so it is important to check the details of any insurance arranged.
Buildings insurance
Buildings insurance may help protect the structure and fabric of your holiday home against certain types of loss or damage, although the precise scope of cover varies between insurers and policies. Cover may include, or offer options for:
- damage caused by storms and other weather-related events, which may be particularly relevant for properties in exposed coastal locations;
- accidental damage (where selected or included);
- escape of water; and
- other risks associated with a property that experiences frequent changes of occupancy.
Policy limits, exclusions and conditions will apply.
Contents insurance
Holiday lets are often rented out fully furnished, so it may be important to ensure that contents sums insured remain accurate and up to date.
Particular attention may be given to items such as appliances, televisions, guest equipment, furnishings and outdoor furniture.
Cover limits, single-item limits and exclusions may apply.
Property owners’ liability
As the owner of a holiday let, you may have legal responsibilities if someone suffers an injury or property damage connected with the property.
Liability claims might arise, for example, if a guest trips or falls, suffers an injury involving fixtures, fittings or equipment, or experiences an accident in a communal area.
Property owners’ liability insurance may help protect against certain claims, although cover limits, exclusions and conditions vary between policies. Some insurers may offer liability limits of £2 million, £5 million or more.
Loss of rental income
Income from holiday bookings may form an important part of the property’s overall return.
Depending on the policy, some holiday let insurance arrangements may provide cover for loss of rental income following an insured event that leaves the property temporarily unsuitable for guests while repairs are carried out.
Any compensation available will be subject to the terms, conditions, limits and exclusions of the policy and may be restricted by factors such as the period of disruption or the amount insured.
Seasonal occupancy and periods of unoccupancy
Your UK holiday home insurance also takes into account the probability that holiday lets are typically empty and unoccupied for significant periods during the year.
Your rental home may be closed during the off-season or the wintertime. You may also experience significant gaps between one booking and the next even during the holiday season, while some holiday cottages may be let only during peak holiday times.
Your insurer will expect to be kept informed about such periods of unoccupancy and may require specific precautionary measures to help mitigate the risk of loss or damage to the property. Typical precautions include regular – and logged – property inspections, draining down water systems, maintaining an ambient temperature during the winter, and enhanced security measures.
Location can affect insurance considerations
A whole host of factors are likely to determine the premiums you pay for your holiday home insurance, and no single factor automatically leads to any increase in that cost.
Nevertheless, the location of your holiday let may certainly affect the assessment of risk. Factors such as exposure to flooding, a coastal location, or a remote rural setting may influence that assessment. If your holiday home is a listed building or of non-standard construction, this may also be taken into account.
Security and safety measures
Your insurer expects you to take all reasonable measures to mitigate the risks of loss or damage. These typically span measures such as approved locks on doors and windows, and other security devices such as intruder alarms.
But as soon as you begin letting your holiday home – even if only on an occasional basis – there are also statutory obligations with which you must comply as a landlord. You may review a summary of these responsibilities on the official government website. Obligations include:
- annual gas safety checks (if there is a gas supply installed);
- electrical safety checks at least every five years;
- the installation of smoke and carbon monoxide alarms where appropriate.
Mortgage and lease considerations
If you are buying your holiday home with the help of a mortgage, remember that the lender may impose certain conditions or restrictions on letting the property. Similarly, you may also need to comply with any conditions written into the lease of the holiday home. There may even be covenants restricting the rights of freeholders to let the property.
These conditions and restrictions, of course, vary from one property to another, and you may want to review the relevant documentation carefully.
In many instances, mortgage lenders and lease conditions may stipulate that suitable holiday home insurance always remains in place.
Common mistakes made by holiday home owners
While a holiday home in the UK offers an opportunity to earn extra income from letting, common mistakes appear to be made by some owners. Examples – which are not universally shared by all homeowners, of course – include:
- the assumption that standard second home insurance remains suitable even when the property is let;
- a failure to inform the insurer of the intention to let the holiday home;
- underestimation of the value of the home’s contents – resulting in underinsurance;
- an unawareness of the insurance terms and conditions during periods of unoccupancy;
- the assumption that “guarantees” offered by letting platforms such as Airbnb are a suitable substitute for holiday home insurance; and
- in the case of a static caravan offered as a holiday home rental, a failure to comply with the lease requirements and regulations of the site.
When should you review your insurance?
To avoid the common mistakes made by some holiday owners and to give you peace of mind when deciding to let your holiday home, you may want to carefully review your insurance arrangements before advertising the property and accepting any bookings.
You may also want to review the suitability of your existing insurance and the sums insured following any renovations or refurbishment, and after buying new contents for the holiday home.
During rental seasons, you may also want to review your insurance arrangements if occupancy patterns change.
Your UK holiday home insurance
When you decide to let your holiday home in the UK, remember that this introduces additional risks for the property that may affect the insurance arrangements.
No one size fits all, and your UK holiday home insurance needs may be determined by a host of different factors, including – but not limited to – the type of property, its location, the expected occupancy levels, the letting arrangements, and your individual circumstances.
For further advice and guidance, you may want to consult specialist insurance brokers, such as us here at Cover4LetProperty. We’d be very happy to help.
Further information: Holiday let insurance UK: Essential cover for short-term rental owners.
Frequently asked questions
What is a UK holiday let?
A UK holiday let is a property that is rented to paying guests on a short-term basis for holidays, weekend breaks or temporary accommodation. Examples include cottages, apartments, lodges, holiday homes and some static caravans used for holiday rentals.
Can I use my existing holiday home insurance if I start letting the property?
You should check with your insurer. Standard second home insurance may not provide suitable cover once paying guests begin using the property.
Will holiday letting increase my insurance premium?
Premiums may change depending on factors such as occupancy levels, location, claims history and the type of property.
Do I need public liability insurance for a holiday let?
Property owners’ liability cover may help protect you if a guest or third party suffers injury or property damage connected to the holiday let. Some booking platforms, lenders or commercial arrangements may require certain liability cover, so it is important to check the requirements that apply to your circumstances.
What happens if my holiday let is empty during winter?
Insurers may apply conditions during periods of unoccupancy, such as regular inspections, security requirements, keeping the property at an ambient temperature or draining down water systems.
Disclaimer: This article is for general information only and does not constitute advice. Cover, limits, exclusions and policy conditions vary between insurers. Always check your policy wording and seek guidance appropriate to your circumstances.
