What to consider before investing in a holiday let insurance
As a holiday let investor, you have invested in a high worth asset. To maximise your profits, you’ll be using strategies to boost year-round income. This means attracting more tenants to your property. In the same way that a buy-to-let landlord puts their faith in their tenants to treat their property well, so will you.
Unfortunately, there is always the possibility that something will go wrong. A holidaymaker cancels because of unforeseen circumstances. The local area becomes flooded. Accidental damage occurs in your property. To mitigate losses from such events and more, one of the strategies you will use is to invest in insurance.
What type of insurance does holiday let investors use?
Ordinary residential property insurance and landlord’s insurance for buy-to-let property don’t cut the mustard when it comes to insuring holiday let investment. This is because it’s not you living in the property (so insurers believe there is higher risk), and you have more than one set of ‘tenants’ living in your property during a year (so insurers believe there is higher risk).
What you need is specialist insurance for holiday lets. This could cover you for a whole range of issues, including fire and flood, accidental damage and loss of earnings.
What insurance cover can you buy for holiday let properties?
Buying the right insurance cover for your holiday let can be confusing. You must consider what you want it to cover, and then consider the restrictions that different lenders place on claims. Then you need to compare different companies for costs.
What cover might you need?
Of course, you will want to insure your home against flood, fire, storms, etc. But there are many other events to consider as the landlord of a holiday let. Here are some possibilities against which you might need insurance.
- Public liability cover
In case someone has an accident on your holiday let, and they claim against you for medical costs and loss of income/lifestyle.
- Employer’s liability cover
Similar to public liability, but specifically covering claims made by employees or people working on your holiday let (e.g. a cleaner).
Some insurers require proof of forced entry for a claim to be made.
- Accidental damage
Items may get broken in your holiday let property. You may have taken a damage deposit, but should you also consider insurance to cover accidental damage?
- Damage to buildings
This will cover accidental damage to buildings, such as broken windows and doors.
- Loss of income
What happens if your holiday let cannot be used because of a flood or fire, or other claimable events? A loss of income clause could ensure that an accident or event beyond your control doesn’t turn into a financial crisis.
- Alternative accommodation
If there is an incident that stops pre-booked guests from staying, the last thing you want is to ruin their holiday. Simply saying “Hey, there’s no room at the inn” is not a good way to conduct business. Alternative accommodation cover will pay for the cost of providing alternative accommodation needed because of an uncontrollable event.
- Legal expenses
Legal expense cover will help pay for events such as the need to evict overstaying guests (thankfully, a very rare event), residential issues, consumer claims, and tax protection.
Watch out for restrictions
When comparing different insurance quotes, you must check the fine print. If you don’t, you may think you are covered when you aren’t. Here are a few of the main restrictions that insurance companies may place on their insurance coverage.
- Occupancy limits
If your holiday let property sleeps a maximum of six, you don’t want eight people sleeping there. Firstly, over-occupancy increases cost from extra wear and tear. Secondly, it may negate your insurance cover.
- Inspection restrictions
There may be a requirement for you to inspect or occupy your holiday let regularly. If you can’t prove that you have, and then need to make a claim for, say, a burst water pipe, the insurance company may not pay the claim.
- Winter warranties
Some insurance policies may require you to turn the water off, leave the heating on, drain down systems, etc.
- Security restrictions
Some insurance policies insist that you take specific security measures. These may include having specific locks fitted to doors and windows, burglar alarms, and automatic intruder lights fitted to external walls.
- Family and friends restrictions
Some policies may not offer the flexibility to use your holiday let yourself or to let to family and friends. It’s worth checking exactly how your holiday let may be used before signing the insurance contract.
Most holiday let owners never need to make a claim, but this doesn’t mean that insurance is a waste of money. It does two very important jobs:
- It ensures that your profitability isn’t compromised
- It gives you peace of mind and helps you sleep well at night
With these two benefits, we think you’ll find the right policy is worth every penny you invest in it.
To learn more about the advantages and benefits of holiday let property investment, contact Gladfish today on +44 207 923 6100. We’ll be happy to discuss how a holiday let investment might fit in with an existing portfolio or be the investment to help you achieve your lifestyle goals.
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