A UK holiday lettings business seems to be a very good proposition just now. With so many families feeling the pinch financially, plus the problems in the airline industry, more and more people are choosing to holiday in the UK.
Of course when you are starting out in the holiday lettings business there are lots of issues you have to sort out, and one of the main ones is holiday let insurance. Holiday let insurance is very specialised and is usually provided by specialised companies. It is going to be more expensive than normal household insurance, but remember it can be set against tax.
When you start comparing holiday let insurance policies, you will find that they all seem to cover different things. So what are the essential elements that need to be covered by holiday let insurance?
• Contents cover (that is, cover for your contents, not the tenants’ belongings). You can’t guarantee that your guests/tenants will never forget to lock doors and windows, at night or when out. You need to insure against burglary and theft (including lock and key replacement) and also against accidental damage and breakage. It’s a good idea to charge your guests a refundable deposit to cover you for any excess you may have to pay. You must make it clear to tenants that your holiday let insurance does not cover their belongings – it is their responsibility to take out travel insurance for this.
• Void periods. You can’t be sure that your holiday home will always be occupied – it’s likely that there will be empty periods, especially in winter. Your insurance must cover all risks during these periods – flood, water damage, burglary and vandalism, electrical faults that might cause fire, etc. Take all the precautions you can against these risks – security, regular checking, etc. – to keep your premiums down.
• Loss of rental income. If anything happened to make the house uninhabitable, such as a fire or flood, you would not only lose rental income but would have to refund advance bookings and deposits. Your holiday let insurance also needs to cover emergency arrangements you have to make for tenants in the property at the time of such an incident – you would probably have to put them up in a hotel.
• Public liability insurance. This is required by law, to cover you against any accident or injury your guests might sustain on the property – slipping in the shower, tripping in the driveway etc. If your holiday property has a swimming pool the insurance is likely to include special restrictions and the premiums will be higher. You also need to display disclaimer notices advising guests that children must be supervised etc.
• Employer’s liability insurance. This is also legally required, if you employ anybody on your property such as a cleaner or gardener.
When you look at all the possible risks, it’s really not surprising that holiday let insurance is harder to obtain and the premiums are higher. However, if you are going into this business you have to be covered against all these things. Many tenants will want to see your certificate, and if you use an agency they will require proof that you have holiday let insurance. Rather than taking several separate policies, ask your broker to find you a single policy covering all the different elements. That way you can be sure nothing’s left out.