The Algarve is one of the favorite places were foreigners buy an holiday home. Regardless of whether your holiday home is used as a weekend retreat, short holidays or for commercial holiday letting, it is vital that you protect your property with adequate insurance coverage.
Most insurers see bigger risks associated with holiday homes because they are left unoccupied for long periods, prone to burglary and weather damage. Therefore, insuring your holiday home with a policy that doesn't include strict terms can be difficult.
Don't be tempted to use a standard house insurance policy and not disclose that the property is a holiday home, because insurers have the right not to pay if you make a claim and void the insurance.
The best option is a specialist insurance policy that is tailored for holiday letting and occasional use.
Before you opt for the cheapest policy available that is likely to provide inadequate cover and include an array of conditions, follow the guidelines below.
This guide highlights some specific cover that you need to consider when insuring your holiday home and identifies some of the hidden restrictions that can render a policy worthless.
Your holiday home is likely to be one of your largest financial assets, so it's essential that the structure be protected. Also, mortgage lenders will insist that you have adequate buildings insurance as a condition of the loan.
Typically, building insurance covers the actual structure of your holiday home, 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 should also cover permanent fixtures and fittings within the buildings, such as fitted kitchens and bathrooms.
Most people think they should insure for the current market value of their second home. This is wrong. The sum insured needs to cover the cost of rebuilding the property should catastrophe strike and your property is reduced to rubble. The rebuild value is the full cost of reconstruction of the building(s) in its present form. This amount must include all outbuildings, garages, pipes, domestic tanks, swimming pools, tennis courts, drives, patios, terraces, walls, gates and fences.
The most accurate way to calculate the rebuild cost is to instruct a chartered surveyor to prepare a professional rebuilding cost assessment for buildings insurance purposes. Alternatively, if you had a survey report done on the property, there should be a rebuild figure listed for insurance purposes. It is important to get this figure right to avoid being under insured.
Most insurers will automatically index link, which means the sum insured will be adjusted yearly in line with the house rebuilding cost index.
Periodically check that your buildings insurance amount still reflects the actual rebuild cost, especially after structural improvements.
Contents insurance is not a legal requirement but to forget its cover is a huge gamble - the cost of replacing all your belongings is likely to cost thousands of Euros.
This typically includes general contents within the home such as furniture, furnishings and electrical equipment. Most policies cover your contents in the event of fire, storm, flood (escape of water) and theft.
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.
Holiday homes insurance policies do not usually cover personal valuables as most properties are often left unoccupied for long periods or if they are commercially let. If you take valuables to your holiday home you should insure them under the all-risks section of your main household policy or travel insurance.
It is likely that your holiday home will be used by an array of people - friends, family and holidaymakers if you are letting you home. Consequently, damage is likely to happen, from spillages, breakages and misuse. In this case, you should choose a policy that covers accidental damage (and malicious damage) to your contents so you don't bear the expense of replacing items.
Guests often aren't as careful as you and accidents do happen. On a side note, if you market your holiday let as 'pet friendly' check your insurance covers damage by pets.
It is very important that your policy includes public liability insurance, especially if you are planning to let your second home commercially or to friends. These are litigious times and this covers you for legal costs and expenses following death, injury or damage to a third party on or near your property.
Even if you are not planning to holiday let commercially, what happens if a friend uses your holiday home and they slip in the shower, break a leg and have time off work.
Maybe they take legal action against you? If you are letting your holiday home via an agency, most will insist that you have this cover, a minimum indemnity of 3 million Euros is recommended. Liability cover is usually included when you insure buildings or contents. It is unusual to find a stand-alone policy, and always check it covers third parties staying at your holiday let.
It is a legal requirement that if you employ people while running your holiday let business 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. You should choose a policy with an indemnity limit of at least 3 million Euros.
Disclaimer: this information should be used as a guide only and should not solely be relied upon. We advise that you read any insurance policy terms, conditions and exclusions thoroughly, seeking professional advice if necessary to fully understand the extent of cover provided.