See our suppliers page for Specialist Insurance Companies
This is never a jolly subject like planning a holiday or thinking what you are going to do for a celebration. The nature of insurance is to imagine something bad happening and to take precautions against any event should you be so unlucky. Thinking about bad things is not a jolly affair but it is vital to avoid gambling. Domestic home insurance is less costly than insurance for holiday letting and the difference is not as great as might be expected. If the holiday let or b&b operation is in the same building or in the same area normally covered by domestic home insurance, it is highly likely that you will need to either extend your home insurance or arrange for diffferent or separate provision.
Do not be put off. In some cases this arrangement is quite within the ability and interest of existing insurers but, often, those that do not really want the business can quote sky high figures. It is well worth seeking specialist insurance providers with a history of experience in the holiday accommodation industry to discover that rates can be surprisingly good value.
A list of the different aspects of insurance to start might be a good idea to gain some perspective on the subject:
Never assume that you are covered. Always check for ‘what ifs’:
A list of some aspects that insurance can cover is useful to act as a prompt and illustration:
- loss of business
- defined consequental losses
- legal costs
- public liability
- loss of licences
- legal costs
- loss of keys
- temporary accommodation
- floods, coastal errosion, other extreme weather events
- goods in transit
- loss of board and lodgings
- business equipment
- loss of data
- buildings insurance
- vehicle insurance
- key person insurance
- loss of income
- cost of alternative accommodation for guests
- property of guests
- property of employees
- cost of new locks
- loss of metered water
- cost of burst pipes and damage
- insurance between guest stays when the let is unoccupied
- equipment breakdowns including contents of freezers and fridges
- losses due to murder or suicide
- infectious diseases
- vermin and pests
- denial of access
- unusual items such as elevators / hot tubs / swimming pools / sports facilities /sanitation and drainage problems
- holiday cancellations
- sometimes: employer’s insurance
This gives you some idea of the myriad of legally required cover, essential and insuring options. Each aspect has its own peculiarities. I shall cover one particularly important example here to illustrate the need to be deliberate and careful when arranging the right cover. It is quite hard doing this because most of us find imagining something horrible happening unpleasant, at the best of times.. but insurance must start from there to be able to provide some peace of mind and, hopefully, never to provide enormous relief if that unpleasant imagined event turns out to happen and that you are fully covered for the consequent damage and upset it carries in its wake.
Take steps to be sure that you can prove the situation before any upset or event. This means taking inventories, photographs and fully ascertaining the condition and status of the building and the entire insured area including any out buildings and other facilities such as garages, games rooms, hot tubs etc:. The more information that you have about how things were before any event, the easier it will be to settle a just claim.
It is very tempting to underestimate the cost of rebuilding a house for insurance purposes. We are sailing close to the wind with our listed building of about 251 sq m and £400,000 estimated rebuilding costs before demolition, legal fees. It can come as a shock to owners that damage to, say, effectively 1/10th of the structure and all insured building in the area covered might not be entirely covered if you have under estimated and declared the cost of rebuilding the entire structure / structures.
If you insured a total rebuilding cost of £400,000 and it turned out that the actual sum should have been £500,000, this means that you will only receive 4/5ths of the total cost of any damage restoration whether the damage was to one tenth of the combined buildings or whether the whole lot required a total rebuild. This can have surprising consequences. For instance, if a house is insured along with a brick built swimming pool house and, perhaps, some other outhouses where it would be virtually impossible to see the out houses destroyed at the same time as the main edifice, the rule would still apply.
It is important to have no illusions about under insurance. Just because you have paid 4/5ths of the total insurance for a 100% rebuild does not mean that you will get 100% of the costs back for rebuilding, say, 1/10th of the entire buildings structure following a fire. You will not. The element of risk and liability for every percent of the building is the same. Theoretically, if only one brick needed replacing if you had under insured by 20% you will only be covered for 80% of even that one brick. If that brick is from a listed building, you will need to at least double or even triple the rebuilding estimate otherwise you could end up with less than half a brick paid for by insurance cover.
Similar rules apply to most aspects where valuations are required for insurance purposes. It is essential to be very aware of the perils of under insurance. Get it wrong and the relief feeling you are covered after misfortune can be easily turn to dismay.
Consider any extra risks
It is easy to forget to check your insurance conditions when adding new things to the accommodation. Wood burners, hot tubs, swimming pools, and even innocuous items such as bbqs need to be checked to see if they and their use are covered by insurance. The detail can be sufficient that an insurance company may feel a small additional premium necessary if a wood burner turns out to consume wood rather than using a gas fired alternative. If you choose to permit pets, even here, it is worth being cautious as certain items treated in a way some nervous pets away from home might behave can end up damaged or ruined. Although surprisingly rare, it is worth being aware of this.
Risk control and minimization. Some tips:
- Use a specialist insurance company that knows the holiday let market / bnb market well. (See our Suppliers Page for Specialist Insurance Companies)
- Ensure the holiday let looks clean and tidy. Avoid rubbish building up. An uncared for look tends to draw the attention of those you could do without
- Consider an alarm system
- Make sure circulars, free newspapers and other items do not build up.
- Check all pipe lagging and drain down the plumbing as well as switching off the electricity at the main fuse box
- Try to make sure of a friendly local pair of eyes
- It might be worth thinking of employing a local letting agent: take great care to select the right agent and dedicate some time doing this
- Guests should have the opportunity to be clearly aware of their responsibilities to minimise or avoid disagreements
- Provide a full welcome and information book outlining terms and conditions and other guidance.
- Ensure the holiday let complies with all rules, regulations and local requirements
- Do a full inventory, ideally using photographs and including any receipts where applicable
- Respond quickly to all enquiries and concerns
- Get the advertising right and make sure it offers what you provide.
- Never let anyone access until the entire rental has been paid and any security deposit banked. Do not accept cheques unless they have cleared.
- Security deposits rarely cover the value of contents, but use them where practical as a reminder that you care. Indicate when the deposit will be returned assuming a successful stay
Insurance brokers should be handled with charm and attentiveness. Specialists are easier to deal with because they, generally, have the Tee Shirt so will know what questions to ask so guiding you through what will be a new experience for many people. You should seek two or three quotes as good practice but much more than buying standard house insurance, the style and helpfulness of individual brokers and the companies that provide the insurance is important.
Specialist insurance provision has at least two quality factors to consider beyond just price. The ability and profiessionalism of the broker and, of course, the quality and standing of the insuring company itself. Although often dull and seemingly dogged by ‘what if’ thoughts of disasters that most likely will never happen, it is worth trying to approach the whole exercise in a positive and interested manner. Paying the premium is one thing, getting it right is quite another.
It is highly likely that you will never have to make any major claim on an insurance policy, but taking time and being positive about such a dull but necessary task is absolutely essential. This is, I know, far easier said than done. Who has heard of jolly insurance jokes or the joy of buying insurance? I have only scratched the surface in all this and hope to bulk out and provide more detail later because this neglected subject deserves more attention and bit more positivity.