Home from home

It was once only the very wealthy who could afford second homes, but times change and for those who have inherited their parents' property or are simply doing well, there is also a growing desire to own their own place away from it all.

The British love of property ownership, combined with the need to put by wealth for a future retirement, has created an explosion of second home ownership, both within the UK and overseas. And, of course, whether second home or holiday let, all property needs to be covered against the usual risks plus a number of other eventualities.

Dave Jones, director of Mountguard Insurance Services in St Ives, Cornwall, probably deals with more than the average number of second and holiday home covers. On second homes he says: "The issue is not so much that they are empty for such lengthy periods but that should a claim arise, it may be weeks (even months) before anyone can discover the problem, by which time considerable damage will have occurred."

Most insurers will permit only 60 days of unoccupancy with a standard policy before theft, malicious damage and escape of water risks cease to be covered (unless they have been informed of any longer period, in which case an additional charge may be made).

In a city, unoccupied time might matter but most holiday homes are in lower risk areas anyway. However, some remote rural settings do offer thieves an opportunity to clear a house at leisure, so costs of cover and restrictions will reflect this.

The issues for properties that are let on the holiday market for all or part of the time are a little different. Mike Henderson is managing director of Holiday Cottages Insurance, a specialist broker offering schemes and individual holiday homes insurance for UK properties.

He explains the particular issues that such cover needs to address. "(Holiday home owners) will need to be covered for: public liability; loss of income following damage; theft without the necessity of forcible entry (a diplomatic way of saying theft by customers); accidental damage cover for the building and contents; and the widest possible cover during unoccupied periods." Plus, of course, all of the normal covers.

If the property is abroad, there will be other considerations relating to the extent to which UK-based insurers will be willing to cover overseas risks. Often developers and holiday rental agencies, whether overseas or in the UK, will have arranged schemes for their buyers and property owners.

It may be that, if such a scheme is administered locally, an owner might be better served using it so that any problems can be dealt with promptly and there is someone locally responsible for the quality of any work.

But some UK insurers such as Norwich Union (NU) will cover an overseas second home for policy-holders who insure their main UK residence with the company. NU will offer similar terms for overseas properties as it will for UK ones, but with a maximum buildings cover of £250,000 and maximum contents of £50,000 in France, Portugal, mainland Spain and Ireland.

Door locks

"The main issue with overseas properties," explains Pete Cormack, household underwriter at NU, "is security, with some properties in, say, France not even having door locks, let alone the standard of door and window locks required".

"Usually, a purely second home (that is only used by family and friends and without charge) can be covered under a normal household policy," says Jones. Cover may be more expensive, restricted or carry a higher excess if the property is left empty for more than a stipulated time.

Often such homes do not contain the value of contents that a main residence might have and they are often smaller buildings on lower cost land than the main residence, so that can mitigate some of the extra costs.

And, of course, some items that might be brought temporarily during visits will often still be covered under the main residence policy.

Cormack adds that: "We will only offer cover (under a personal lines policy) where a second home is only used by the owner, their family and friends." Holiday lets fall into the commercial cover category.

Because properties rented out on the holiday homes market will be occupied for more time during the year, the occupancy restrictions applied to second homes may not arise. And there is a range of cover options to allow the owner maximum flexibility in dealing with the consequences of a claim.

Commercial status

For instance, liability wording will be geared to the commercial status of a property owner rather than the needs of a household. And where loss of rent is covered, a choice may be offered whether to take simple compensation for the loss or to cover the cost of alternative accommodation for disappointed holidaymakers. This is especially useful where an owner has a lot of repeat business from the same families each year.

And, unusually nowadays, this is not a solely price-focused market, especially where second homes are concerned. People with a second home are, almost by definition, reasonably well off and the fact that they cannot always be keeping an eye on their property may mean that they need just a little more reassurance.

So, they will not necessarily go for the cheapest option but would rather consider the best solution. The quality and spread of cover, especially during unoccupied periods, and the service offered by the insurer will be the main considerations.

Quite a few clients will return to the broker who covers their other needs when seeking cover for a second home or holiday property.

Mountguard will cultivate relationships with letting agents and offer the kind of service that generates referrals from current clients - word will get around if you have got a good product and can help.

At the end of the day, it's just a risk but one that may have more than average emotional content and where the peace of mind factor will be more valued by those whose dream getaway home is often hundreds, or even thousands of miles away.