There's no doubt that holiday letting is a booming market. Holiday homes are being let out for a few weeks or months each year to people who fancy a change of scenery or a staycation in cosy apartments and cottages.
A report reveals that holiday lets offer a 30% higher yield. Consequently, many are considering it as an investment opportunity. Hence, you need to be well informed on the right insurance policy that would protect your holiday letting business.
Many hosts opt for holiday let insurance because it protects their finances and the property's value against damage. If you have a mortgage on your holiday home, your lender might suggest you have Airbnb cover to protect you against any property damage by guests. However, holiday home insurance may be a better option.
Read on to learn more about holiday rental insurance, how it protects the landlord and guest, costs and factors that affect insurance for holiday lets in the UK.
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What is Holiday Let Insurance?
Holiday let insurance is a type of insurance that covers your holiday rental property. This type of insurance can help cover damages that may occur due to unexpected events such as fire outbreaks, theft, storm, vandalism, or other problems during the occupation. It also covers the contents of your property, loss of income, and any legal expenses involved in dealing with claims.
Typically, holiday letting insurance policies are sold as "coverage add-ons" to other types of insurance. This means that you can buy the policy without any changes to your current coverage, and the insurance company will automatically add it to your policy.
Holiday Let Insurance vs Standard Home Insurance
The rise of holiday let websites such as Airbnb, Bookings, Vrbo, Interhome, and many others have led to a surge in short-term holiday rentals. There are over 7 million global listings on Airbnb this year, managed by 4 million hosts.
While the increase in holiday lettings has undoubtedly been good news for homeowners, it also presents a number of challenges which spur the need to insure your short-term rental property. But what are these risks, and which insurance policy is best for you?
You can get the most comprehensive protection with a holiday let insurance policy because it provides coverage for certain risks that are not covered by regular home insurance. Some of these risks include loss or damage caused by floods and earthquakes. It also offers personal liability for your guests and additional living expenses in an emergency.
A standard home insurance policy, on the other hand, does not cover a broad spectrum of risks. This is because home insurance is designed specifically for owner-occupied properties, not for situations where owners let the accommodation to others for short periods.
You are probably wondering, why can't home insurance substitute for a holiday let? One of the reasons is that homes for short-term lets and Airbnbs are more likely to be left unoccupied for extended periods. Hence, increasing the risk of unfortunate events, such as theft.
Also, things can go wrong in your home even if you do your best to get responsible guests. For example, your guests could accidentally break something or cause other damage that costs money to repair. A holiday let insurance policy will help you cover these types of expenses and more.
For more information on how you can successfully run your holiday letting business without interruption, read our comprehensive guide on how to run an Airbnb business remotely.
What Does Holiday Let Insurance Cover?
Building Insurance covers potential losses that can occur on a building's structural components, such as the roof, walls, and windows.
This type of insurance differs from most types of property insurance by accounting for damage caused by events that occur outside of the property owner's control (such as natural disasters). It also covers damages from man-made events, such as fires. The insurance company will conduct a risk assessment of the building before determining whether to offer coverage.
Typically, the coverage amount for each type of loss is specified in the policy. For this aspect of holiday letting insurance to be effective, the policyholder must have accurate information about their building. You can obtain this information from the property insurance company, the building's architect, or a third-party source. They must also ensure proper building maintenance to minimise the risk of loss.
Buildings cover is essential if you're taking paying guests into your holiday properties. You may need to get specialist insurance here, so ensure to speak to an expert.
1. Content Insurance
Anyone who has ever rented out a property knows how important it is to ensure you have the right level of insurance in place. But what exactly does holiday home content insurance cover?
Holiday let content insurance is an insurance policy that protects the contents of your holiday rental property from accidental damage or theft. This differs from building insurance in that it does not cover the structure itself or any fixtures within the home but instead covers belongings a person can take away. Insuring your holiday let's content is an important step in protecting your investment. It gives you peace of mind while your guests are staying on your property.
To minimise the chances of having many ruined items, it's important that you vet your guests before granting them access to your home. In our years of managing over 500,000 Airbnb bookings, we have managed to minimise instances of damaged property by guests. And we'd be happy to help you improve your guest vetting process using our database of verified guests. Get in touch with our team for assistance.
2. Public Liability Insurance
You will want this coverage when running a holiday letting business because it protects you against lawsuits guests may file against you due to your actions or omissions in your professional capacity.
It also protects you from being held liable for other people's accidents when you did everything reasonably within your power to prevent them. For example, if someone trips on your outdoor rug and sues you, your liability insurance will protect you. You can buy coverage from a broker or directly from the insurance company.
3. Loss of Rental Income
Loss of rental income occurs when the property is not available for rent due to an uncontrollable situation. For example, if there was a fire in your home and it was deemed uninhabitable, then there would be a loss of rental income as you can not charge for people staying there. And here's where the holiday letting insurance comes into play. You may be compensated for your loss of income depending on the insurance policy you opted for.
Loss of rent can have a big impact on your business, which is why many people opt for an expert to manage their property and reduce risk.
Keep in mind that holiday let insurance policies can vary by provider. A specialist holiday rental insurance policy covers the property and its contents against various risks associated with letting your holiday home.
How Much Does Holiday Let Insurance Cost?
There is no definitive answer to this question as it varies depending on the policy coverage, location, and property size. Nevertheless, for a standard policy, you can expect your holiday house insurance premiums to range from £205 to £250 per year.
The higher the value of your property, the more expensive your holiday rental insurance policy will be. This is because the higher the value of the property, the higher the risk to the insurance company. The value of your property may be affected by factors outside of your control, like the stock market's performance.
What Factors Affect the Cost of Holiday Let Insurance?
1. Property Type
Different types of homes have different cost structures depending on their value and risk factors. Let's compare holiday home insurance for different property types.
For example, if your insurance premium for a terraced house costs £217, the typical holiday cottage insurance premium would be around £250.
Terraced houses typically cost less than detached properties and provide a lower risk level. Similarly, if your house is a single-family home, it will be less expensive to buy holiday insurance for it.
The location of your holiday home also influences the cost of your insurance. For example, if you live in a high-crime area, you'll typically pay a higher rate than homeowners living in low-crime neighbourhoods.
Another holiday let insurance comparison for different areas is this: insurance premiums for properties in coastal areas will be more expensive than the insurance cost for properties in inland areas.
This is because holiday homes near rivers and coastlines have a higher probability of flooding than properties further away from these features.
Small properties typically require minimal insurance premiums because they have a lower catastrophe risk. Most small houses don't make enough money to receive a large risk rating, which increases their premiums. Smaller properties also tend to have a lower value than larger ones.
You must also be aware that if you have features such as swimming pools, you may also need a different kind of holiday letting insurance UK.
4. Disaster Risk
Weather disasters, such as flooding or extreme winds, can cause major disruptions to your business operations. It's important to stay informed about the risks of the area where your holiday home is located.
For example, if your holiday rental is close to the sea, and a flood has engulfed the area in the past, there is a high chance that it could occur again, and this risk will reflect on your insurance premium.
5. Age of Property
As with any investment, the older a property is, the more it will cost to insure. This is because older buildings are known to have a higher risk of being damaged from tough weather conditions.
For this reason, it is recommended that holiday rentals be insured for a minimum of five years. This length of time will ensure that the property has the necessary age to be covered by certain policies and that the risk of damage is low enough to be insured for a shorter time.
Managing Your Holiday Let With a Property Management Company
Short-term letting is a convenient means of generating income for some landlords and holidaymakers. Anyone who takes up a short-term rental can expect to encounter challenges finding tenants, managing maintenance or insuring their property.
Alternatively, with Houst, you can be sure that all the work is being done by an exceptional team of industry and platform experts. Our team of experts are not only dedicated to finding the best tenants but will also showcase and optimise your property to its fullest potential, making the whole process as simple and stress-free as possible.
We help hosts maximise earnings on their property without doing the hard work of cleaning, maintenance, communication, guest vetting and so on, giving you ample time to focus on other things. For a start, contact us today to get a free estimate of your holiday rental property.