Your second home is likely to be one of your most valuable assets and getting the right insurance cover whether it's used as a weekend retreat, left unoccupied or rented out is vital. This quick guide explains how to get cover that's right for you and the limitations to look out for.
Why is second home insurance different from regular home insurance?
According to research published by the Resolution Foundation in 2019, more than 1 in 10 people across Britain own second homes. Therefore, it's likely that due to the size of the growing number of second home owners there is a choice of UK insurance policies available.
However, finding comprehensive insurance for second homes that doesn't include an array of restrictions or within budget can be difficult.
Most insurance companies associate second homes as an increased risk because they're typically left empty for long periods, which means weather-related damage such as water leaks or a break-in will go unnoticed. If you let your house out to paying guests there's a further risk of personal injury or damage.
You can't take out a standard household insurance policy without telling the insurance company that it's a second home and not your main residence, as this could invalidate an insurance claim and your policy could be cancelled.
Very often, you'll want to do things with your second home that you wouldn't with your full-time residence. A conventional home insurance policy generally won't be valid if the property is being rented out or left empty for more than 30 days.
What you need is a specialist UK holiday home insurance policy in place that is tailored for letting and protects your investment when you're not there.
What does a second home insurance UK policy cover?
There are two types of insurance for second homes: contents insurance and buildings insurance.
What does buildings insurance cover?
Second home buildings insurance is normally compulsory if you have a mortgage on the property. But even if you don't have a mortgage, then you should still consider protecting what is likely to be one of your largest financial investments.
Typically, building insurance covers the actual physical structure of your house (like walls, windows) any outbuildings, garages, swimming pools, walls, gates and fences. These tend to be covered against the cost of repairs or rebuilding, debris removal and professional fees following loss or damage caused by fire, storm, flood, burst pipes and subsidence.
Building insurance also covers permanent fixtures and fittings, such as a fitted kitchen and bathrooms.
How much buildings insurance do you need?
Most people think they should insure for the current market value of their home. This is wrong. The sum insured needs to cover the cost of rebuilding the property if it is badly damaged or even destroyed. The rebuild value is the full cost of reconstructing the building(s) in their present form. This amount must include all outbuildings, garages, domestic oil & gas pipes, domestic oil fuel tanks, swimming pools, tennis courts, drives, patios, terraces, walls, gates and fences.
How to calculate the rebuild value
The most accurate way to calculate the rebuild cost is to hire a chartered surveyor (who is a member of the Royal Institution of Chartered Surveyors https://www.ricsfirms.com/) to prepare a professional rebuilding cost assessment for buildings insurance purposes.
Alternatively, a mortgage valuation, the deeds to your home or a previous survey might include a rebuild figure for insurance purposes. You may need to increase the figure to account for inflation and any structural improvements you have made.
To get a rough idea of the rebuild value visit the Association of British Insurers website where you can use the online rebuilding cost calculator and read some good advice.
It is important that the sum insured is accurate to avoid being underinsured and having a claim settlement reduced.
In the event of a claim, a loss adjuster may be appointed who will evaluate if your sums insured are correct. In the event of underinsurance a ‘condition of average' will apply. This means the amount that is paid out will be reduced by the percentage that you're underinsured.
For example, if it costs £200,000 to rebuild your home but you only insured the buildings for £100,000 and the claim is for £50,000, the payout would be 50% of the total or £25,000.
Second home contents insurance
Contents insurance for second homes is not a legal requirement but it's a good idea to have it – you might be surprised at the value of your belongings. According to The Association of British Insurers, the average value of contents in a three-bedroom family home is estimated to be £55,000. Without contents insurance you would have to cover the cost of replacing items if they are lost or damaged.
What are contents? Contents typically include everything that you would take with you if you moved house, such as furniture, furnishings and appliances.
Most policies cover the contents against theft or damage caused by another kind of peril such as fire, storm, flood and escape of water.
To calculate the contents sum insured you should work out how much it would cost to replace your contents on a new-for-old basis at today's prices. Do an inventory room by room. It is important that you get this figure right and don't undervalue your contents, as in the event of an insurance claim you may not get the full amount you were expecting.
Second home house insurance policies do not usually cover personal valuables. If you take valuables to your weekend home you should insure them under the all-risks section of your main household policy or travel insurance. It also doesn't cover your guests' possessions. They'll need to take out their own insurance to protect their belongings.
Renting out a second home
If you let out your second home to family, friends or commercially, you need a policy that has optional extras that protects you when doing so. Such as:
Guests staying in a second home may not be as careful as they are in their own homes, potentially resulting in damage to the property.
Most policies will not cover accidental damage to buildings or contents as standard. You will have to pay an additional premium if you want to be covered for incidents such as leaving a tap on or spilling a glass of wine.
Also, check that the policy covers malicious damage and damage caused by a pet if your rental is pet-friendly.
Public liability insurance
However well prepared you are, accidents happen and can be caused by the simplest of things – slippery decking or a trailing wire. You could be held responsible if a guest in your second home has an accident and is injured.
Compensation claims in these circumstances can be financially crippling. If you are found to be legally liable, public liability insurance covers you for damage or injury to another person or their property and any associated damages and legal costs.
Employers liability insurance
It is a legal requirement that if you employ people at your second home you have employers' liability insurance. This covers legal costs and expenses following death or injury to anyone you employ. For example, a gardener, cleaner or handyman.
Second homes are attractive to burglars as they usually contain a collection of electrical items and gadgets, plus it is relatively easy to identify when the property is occupied or vacant.
Check that theft by non-forced entry is covered. If a burglar entered through an unlocked window or by using a key would you be covered? Many policies require proof of forced entry for a theft claim to be valid.
It's also important to ensure theft by guests is covered - you never know who you are letting to.
Loss of rent and alternative accommodation
One of the biggest worries when renting out your second home is if your property becomes uninhabitable from an insured event such as a burst pipe, fire or flood. Such a disaster could mean thousands of pounds in lost rental income and a huge inconvenience for many months.
Choose a policy that allows you to claim for the loss of rental income from your bookings and pay for temporary accommodation for holidaymakers in the property at the time of the loss.
You should also consider adding legal expenses cover which usually gives you access to legal advice and covers the cost of taking or defending specified legal action, such as the eviction of overstaying guests.
How long can a second home be left unoccupied?
There's likely to be a higher risk of serious damage due to escape of water, storms or break-ins at unoccupied second homes which may go unseen. While your second home is unoccupied (typically for more than 30 days) your insurance provider may alter the terms of your cover.
For this reason, you should check your second home insurance UK policy for unoccupancy restrictions.
What to check:
- From November to March inclusive some insurers insist all water tanks, pipes and apparatus are drained when the property is unoccupied, or that a minimum temperature (15°C) is maintained at all times. Would you be covered for water damage if your heating was off or if you forgot to drain the water and a burst pipe occurred whilst your second home was unoccupied?
- How often do you have to inspect the property - is it weekly or daily?
Sub-zero temperatures and prolonged frosts are common in the UK. Subsequently, burst pipes are common in unoccupied second homes. To ensure you are protected choose a policy that doesn't include complex unoccupancy terms and winter restrictions - but ones that are easy to manage. Burst pipes are one of the biggest risks that unoccupied homes face!
What are the security requirements?
Will the insurance be invalidated by having the wrong type of window and door locks? But having the right locks and security isn't enough. If you or your guests fail to lock doors or leave a window open when out, then your insurer may not pay out for theft if it's due to ‘un-forced entry'. Something to check.
The acid test of any insurance policy lies in the claims service. At this point, you will discover the value of your policy. How are claims handled? Are claims out-sourced to a company outside of the UK? How quickly will you receive a settlement?
Know your excess
A compulsory excess is an amount deducted from any claim you make on your insurance policy. For example, if you claim for £500 and you have a £50 excess, you'll only receive £450. Different sections of your policy usually have different excess levels. For example, the theft excess may be £150, whereas a typical subsidence excess is £1,000.
Some insurers may reduce your premium if you choose an additional voluntary or higher excess, but this could make claiming on your policy very expensive or not worth it for minor claims.
Flexibility to change to long-term lets
If your holiday bookings are seasonal, you may wish to let your second home on a six-month lease during the quieter winter months rather than leave it standing empty. Make sure your insurance allows you to switch easily.
What other charges are you likely to incur should you want to amend your policy during the year, e.g. changing your address or personal details. If there is an admin charge for doing so, then this could prove an additional expense on top of the premium.
Your questions answered - second home insurance FAQs
What makes a house a second home?
A second home is typically used by the owner and family/friends for holidays or let out commercially for short holiday breaks. It is not your main residence.
How much does UK second home insurance cost?
When it comes to the cost of insuring your second home, it depends on several factors - the type of property (e.g. listed, non-standard) the location (flood risk), the security measures, claims history and chosen excess.
Choosing the right insurance policy
Hints and tips
It's no secret that insurance policy wordings aren't a riveting read! But as insurance doesn't cover every eventuality - it's important you read terms and conditions to make sure you understand what you are covered for, what is excluded, and what your responsibilities are.
- Check any winter unoccupancy conditions – do you have to leave your heating on or drain down?
- Check if the terms of your cover change when your second home is unoccupied.
- If you plan to commercially let your second home you must choose a policy that allows letting. Some insurers only cover use by you and your family.
- Make sure public liability also covers holidaymakers as well as items such as hot tubs.
- Check the indemnity limits.
- Is theft by non-forced entry and theft by guests covered?
- What are the security requirements?
- Does the policy include accidental damage by paying guests as well as yourself or pets?
- Remember home insurance is not a maintenance contract and will not cover damage caused by lack of maintenance, general wear and tear, mechanical or electrical breakdown.
- A cheap policy isn't good and a good policy isn't cheap. While obviously, you want to keep costs down, you also need the best cover possible. When shopping around compare like with like and choose a policy based on the value of cover - not the lowest price.
This article only gives a brief overview. For further advice please contact Schofields to ensure you have the right insurance for your second home. Our specialist policy has no winter restrictions, unoccupancy or security clauses and provides full cover whilst the property is commercially let or occupied by friends or family.