Holiday lets are all the rage. With ‘staycations’ back in favour for UK citizens, and inbound tourism rates ramping up to a record 39.2 million visits in 2017, demand for self-catering accommodation has surged.
The rapid rise of Airbnb – particularly over the past five years or so – has also fuelled a short-term let revolution across the globe. Though not without controversy, its business model has been widely embraced by property owners and travellers alike, who appreciate the flexibility it affords.
For those with a property portfolio or second home, harnessing the potential of this increasingly lucrative market can be an appealing option. But, if you’ve been considering it, have you thought about what your insurance needs may be?
Alan Boswell Group’s Kathryn Jervis and Clare Waring are here to explain why standard home or buy-to-let insurance just won’t cut the mustard…
Doesn’t home or buy-to-let insurance cover holiday lets?
It’s a common misconception that home or buy-to-let insurance will cover a property and its owner for short-term lets as a holiday home or Airbnb. But unfortunately, such policies just won’t provide the very specific, enhanced cover that you will need.
“Home insurance is designed for owner-occupied properties rather than situations where owners are letting the accommodation to others. Meanwhile, buy-to-let (also referred to as ‘landlord’ or ‘property owner’) insurance is usually subject to an Assured Shorthold Tenancy (AST) agreement being in place between the owner and the tenant, often with a minimum term of, say, six months,” explains Kathryn Jervis, Team Leader – Property Owners at Alan Boswell.
Indeed, the length of time a property is occupied is a key factor in determining the type of insurance that is required. Home and buy-to-let insurance policies generally require a residential property to be inhabited for the majority of the year, which is not always the case with holiday lets.
“Furthermore, these policies are not designed for situations where there will be a high turnover of tenants and/or guests staying for short periods, who will not be referenced or checked before staying in the accommodation,” Kathryn adds.
Basically, it all comes down to the level of risk a property faces. If you’re opening your doors to multiple, unvetted guests who are less invested in the property than you or a long-term tenant would be, and if the property may stand empty for periods of time during low season, you’ll need a specialised insurance solution to keep your investment fully protected.
Which holiday home insurance is right for me?
If you’re looking to rent out your property on a short-term let basis, there are two main types of insurance to choose from: holiday home and serviced accommodation. But what are they?
These sit somewhere between a hotel and a traditional holiday let, combining hotel-like services such as housekeeping with added space and privacy, plus amenities such as cooking and washing facilities. They also tend to be available for short- or longer-term bookings, rather than in blocks of a week at a time.
Serviced accommodation insurance is tailored to this specific model of short-term letting. Key covers include buildings (if required), contents, business interruption, public liability and employers’ liability. Add-ons such as legal expenses and terrorism cover can also be arranged.
“At Alan Boswell, our serviced accommodation insurance is on a commercial combined contract, specifically designed to cover a serviced accommodation business and its associated activities and liabilities. The business interruption cover, for instance, is based on estimated annual turnover, which takes into account seasonal adjustments in income. This is a key point of difference compared with buy-to-let insurance, which only provides standard loss of rental income cover and relies on an AST being in place at the time of the loss,” Kathryn explains.
These meanwhile, are residential properties that are commercially let (or for the owner’s occasional use), but with no added servicing.
“Holiday home insurance is much the same as serviced accommodation cover, except it includes loss of rent/alternative accommodation rather than business interruption cover,” says Clare Waring, Personal Lines Manager at Alan Boswell.
Overseas holiday homes also hold specific insurance requirements. For instance, you may need to cover travel expenses incurred when reaching your property in the event of an emergency.
Since these products are designed for short-term lets, the public liability cover they offer takes into account the potentially increased risk from a high turnover of guests and visitors, while the employers’ liability can cater for staff and contractors engaged in conjunction with running the accommodation.
So, while home and buy-to-let insurance may cover your buildings, contents and liabilities as a property owner, they don’t take into account the various liabilities associated with running a holiday home business.
Going without the appropriate cover is simply not worth the risk because, in the event of a claim, you may find that the loss, damage or injury won’t be covered – either because the policy doesn’t extend to cover the incident in question, or because the insurer didn’t fully understand the situation from the outset.
The best way to avoid any nasty surprises, and to safeguard your investment, is to consult an independent insurance broker with plenty of expertise in short-term let insurance.
The team at Alan Boswell Group has experience in dealing with all types of properties and will ask appropriate questions in order to fully understand the risk before advising accordingly. This is so important, because there can be any number of short-term let scenarios – especially in an ever-evolving market.
Each client’s circumstances will likely be completely different to the next!