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Insuring your Holiday Home

Second home ownership abroad has increased significantly over the past decade and low mortgage interest rates and easier access to finance plans for foreign property. Once ownership has been transferred to you, you need to think about how best to insure your home against a host of risks including burglaries, damage and unforeseen acts.

If you intend to rent out your home, you need to ensure that your policy allows you to do so. Finding an insurance company who is prepared to insure your holiday home may prove difficult because second homes provide greater risks for insurers; they are vacant for long periods making them easy targets for burglary as well as damage through inclement weather.

 

It may be tempting to use your regular household insurer, or one based in Bulgaria and not divulge that your new home will be vacant for significant periods of the year. In the event of a claim under such circumstances, the insurer does not have to pay out if you make a claim.

Building Insurance
Building insurance will shield you from the cost of maintenance or reconstruction, the removal of debris, legal and professional fees in the event of loss or damage caused by subsidence, fire, inclement weather or burst pipes. It is worth noting that insurance against earthquake in Bulgaria is not an automatic addition to a buildings policy and needs to be taken out as at an additional cost.

If you have taken out a mortgage to buy your second home, your lender is likely make building insurance a condition of the mortgage.

Ensure that your building insurance covers the actual structure of your home, any outbuildings, garages, swimming pools, walls, gates and fences as well as covering permanent fixtures and fittings inside your home like fitted kitchens and bathrooms.

Many people insure their home for the current market value, but in effect, the sum insured should cover the cost of rebuilding your property in its present form including the reconstruction of walls, outbuildings, swimming pools etc.

You need to familiarise your self with current construction costs in Bulgaria and can do this by asking a selection of builders for a quote. Alternatively, the Association of British Insurers website contains some excellent advice about rebuilding and has an online calculator (www.abi.org.uk)

Contents Insurance
Contents insurance covers moveable fixtures and fittings like furniture, curtains, and electrical goods - in essence, everything you would take with you if you moved house.

Content policies usually cover your possessions in case of theft, fire, storm and flood. You need to decide how much it would cost to replace the contents of your home on a new for old basis at current prices.

You must ensure that any valuables you take on holiday with you, like pieces of jewellery, are covered by your insurer back home or your travel insurance. Most insurers do not cover personal valuables and you should not leave any in your property when it is unoccupied.

If you intend to let the house or allow friends to visit unaccompanied, you should take out a policy covering accidental damage. This way you will be covered if for example, a guest stains your furniture or carpet.

Public Liability Insurance
If you intend to rent out your home, you need to include public liability insurance to cover you for legal costs and expenses, should death, injury or damage occur to a third party on or near your property. This type of policy would cover you if a guest or friend sued you because they fell down your stairs, broke an arm and had to take unpaid leave from work to recover. Many insurers recommend a minimum indemnity of £3m.

Employers Liability Insurance
If you intend to use your home for holiday letting and intend to pay someone to look after the general maintenance of it, you need to ensure that you have employer’s liability insurance. This will cover you for any claims for death or injury to those you employ, like a gardener or cleaner. Again, an indemnity limit of at least £3m is recommended.

Loss of Earnings
If you plan to let your home out you need to consider a policy, which covers loss of rent and the provision of alternative accommodation for guests, in case things go wrong. Thus, if your property becomes inhabitable because of a burst pipe, your guests may demand alternative accommodation. In such circumstances you could lose rental income and provide new accommodation from your own pocket whilst the problem is rectified.

Legal Expenses Insurance
This should not be confused with public liability insurance. Legal insurance covers you for legal costs and claims against you, which arise out of a dispute for example with a letting agency you have contracted or with a tenant. It is advisable to take out a policy, which covers you for up to £50,000 worth of legal fees

Check the Small Print
Don’t just listen to the insurer explaining the details about your insurance cover, read the small print!
You need to ensure that there are no clauses eliminating cover if the house is not habited for over 30 consecutive days, or when let to people who are not part of your family. Some policies will only ensure you if someone (it does not have to be the owner) visits the property every week. Others will suspend cover if there are no
security locks installed or if the heating system is not drained when the property is unoccupied or that the property is heated on an ongoing basis to a specified temperature.

You also need to check the conditions of renting your home. Some policies will not allow you to combine holiday lets during summer with long-term lets over winter.
Failure to comply with any conditions laid out in the policy will mean that your claim is not valid and your insurers will not pay out.

Making a Claim
Ensure at the outset that you know what the claims procedure is with your insurer and how quickly you will receive your money. Many Bulgarian insurers insist on original receipts for all items stolen or damaged and will not cover you for items where these are not present.