‘How does holiday let insurance work?’ is a common question that we at Sykes get asked, especially by owners...
Getting an accurate quote for your ‘buildings sum insured’ is an essential part of getting the right buildings insurance cover for your holiday let, and getting it wrong can lead to serious financial implications. More than two thirds of household properties are underinsured, sometimes up to as much as 70% less than the actual re-build cost.
To make sure that you don’t leave yourself under or over insured, take time to calculate an accurate figure for re-building your property, so that your insurance provider can give you an accurate quote.
To save you time and possibly some money, here is everything you need to know about calculating the re-build cost of your holiday let.
In a nutshell, the re-building cost of a property is known and the ‘buildings sum insured’, and it’s the total amount that you will be insured up to in order to completely re-build your property.
Having an accurate figure to give to your insurance provider is essential. If you fail to submit the correct sum, you could end up over or under insured, which leaves you in a great deal of financial risk should anything happen to your property.
It’s very important that you don’t confuse this cost with your property’s current or predicted market value, or the price that you paid for the property.
The figure for re-building your property is different, and it’s your responsibility to make sure that it is accurate. Your premium will be determined by the provider using the figure that you have quoted.
There are 2 main ways in which you can get your re-build quote: by using an online calculator or using a chartered surveyor. Lets take a look at these in more detail:
Using an online calculator is a quick and efficient way to get your re-building cost, but it’s not appropriate for all types of properties.
If your property is a standard construction house or flat, then an online calculator could be a good option for you. You can use the online calculator from The Building Costs Information Service to get an online quote for the re-build cost of your property.
You’ll need to register your details through the website before you begin your quote. The service is free, and draws on many years of experience in the industry to give you the most accurate estimate for your re-build cost.
If your property is listed or of an alternative construction type, then you may need to get a quote from a chartered surveyor.
If your house is of a standard construction, then you may not need to have a surveyor come out to your property. Instead, you can use an online calculator to get a quote for your re-build costs.
Before you begin, you’ll need to make sure that you have all the relevant information to hand. This checklist will help you to prepare for your online quote. Do you have the following information to hand?:
If your property is a conversion flat or purpose built flat, then you will also need:
It’s best to use a surveyor if your property is not made of standard materials. This is a better option for properties that are listed, or of an abnormal structure too.
If your property falls into any of these categories, you need to speak to a chartered surveyor, because the re-building of the property could be more expensive, complex and extensive than a standard property.
Note: Some insurers offer unlimited cover which doesn’t require a re-build quote, however it may still be cheaper to get a re-build estimate and find a provider that can offer you a better deal. You can read our 8 top tips to reduce your holiday let insurance premium here.
Your buildings insurance will normally cover the entire cost of rebuilding the property, including:
The land on which the property is built will be excluded from the insurance policy.
Note: Some property foundations and plinths are not included in insurance policies because they don’t usually get damaged, however they are very expensive to replace. You may need to make a separate declaration for them on your policy, just incase you should you suffer serious circumstances. For more tips on what to look out for with your holiday let insurance, read our post on 5 things you need to know about holiday let insurance.
Yes, you will usually have all of your fees, including architects fees, covered under the policy. Make sure that you check this with your provider before you purchase the insurance to avoid any hidden charges down the line.
You need to give consideration to the construction of the property, specifically the construction method, and this should be discussed with your insurer if the property is not of a standard construction.
Covid-19 has had a significant impact on countless businesses, including holiday let agencies and the insurance industry.
Insurance has been affected in numerous ways, from gaining new business to managing claims. With the UK holiday let industry back on it’s feet, we are seeing a much higher demand for buildings insurance.
But buildings insurance includes things like materials and skilled labour, which is becoming increasingly harder to secure at low cost. Along with this, we are likely to see a rise in the cost on insurance for buildings.
When insuring your holiday let property, you need to make sure that the rebuild cost that you quote to your insurer is accurate. It’s recommended that you use a chartered surveyor if your property is not of standard construction.
Try to avoid giving your insurer an estimate that is based on your property’s current market value. You can read more about buildings and contents insurance here.
For further reading on insurance for holiday letting, you can read our full guide to holiday let insurance.
*Based on a 7 bedroom property in the Lake District with bookings between October 2017 to September 2018.
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