It is easy to get caught up in this brand of risk management, but is insurance really a worthwhile investment? If you are not a high-flying model then leg insurance is probably not going to represent value for money. Hurricane investment may be worth considering in certain parts of America, but is hardly necessity in a quiet Cotswold village. Acts of God can and will happen, but they are rare catastrophes, which no one can prevent. The recent floods in Britain were momentous, but unusual. They also served as a timely warning against building on land liable to flooding.

Although some types of insurance are a modern innovation, the basic concept has a long and illustrious history. Insurance-type schemes existed in Ancient Greek and Roman societies and it is the repetitive nature of certain undesirable events, like fire and theft, which continues to make some types of insurance so popular.

Home insurance in the uk is a common and often necessary purchase. Some letting agencies will not let a property unless a tenant takes out home content insurance. Mortgage borrowers are required by lenders to have building insurance. In 2004, 77% of households purchased home contents insurance and 64% purchased home structure insurance (figures adapted from ABI).

There is a wide range of home insurance policies on the market, offering either content insurance, building cover or both. Many insure against crime, fire and accidental damage. The cost of home insurance depends on a number of factors, for example location, particularly if flooding seems a possibility, and the rate of burglary in the area. It is also possible to reduce premiums by taking out only a small amount of cover. This may be sensible if you are setting up home and do not have many valuable possessions.

However, insurers also recognize the problem of ‘moral hazard’, which means that if you are insured then you may behave in a more careless manner. In terms of home insurance this may mean that people invest less money in alarm systems and strong locks. To protect itself from this risk, the industry may include clauses designed to combat this – perhaps rewarding homeowners who fit an alarm or higher than standard locks.

The proverbial saying that ‘home is a man’s castle’ suggests you should have at least a respectable defence system.

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If a property owner is not fluent in the local language, arranging cover or even making a claim through a local insurer can be problematic.

You need to choose an insurance company with the policies written in “plain English”.

Wherever you choose to buy your holiday home, you’re not going to live there full time and need to know your investment is properly protected. Having the right insurance is all about understanding what assets you own, what liabilities you are exposed to, and what external events can occur which will put you at risk.

Local insurance policies can include variations and exclusions relating to burglary, accidental damage or personal liability claims. Some of these might not include water supply or gas supply pipes or electric cables to the property becoming damaged. There might be restrictions on you letting out the property as a holiday rental or longer let. Other policies might only give a maximum of 90 days un-occupancy at a time and this is not very satisfactory if you have left your holiday home in August and don’t return till the end of January for example.

It is imperative that you check all the details (“small print”) thoroughly and if need to keep the electricity on to keep the heating or burglar alarm working, make sure you let the insurance company know this from the start.

This type of action will avoid problems when a claim occurs particularly if there was a fire caused by an electrical fault and under the terms of the policy, the electricity was meant to be swiched off!

You should never  assume that what is covered under your UK home insurance will automatically be covered abroad, as the expectation of what should be standard cover differs greatly country to country, so that is why it does help having the policy written in English.

When you arrange cover make sure the buildings costs are for the correct cost of rebuilding. Many people think that they should get building insurance at market value. If your property was worth €190,000 last year and maybe the market price has gone down to €170,000 this year, it won’t affect the buildings costs.

Remember you already own the “land” the property is situated on and so assuming the property was destroyed by fire the insurance has to cover the removal or repair of the building shell and the erecting or repair for the replacement. The sum insured should be sufficient to rebuild all buildings as well as all outdoor structures such as swimming pools, terracing or perimeter walls.

If you are having difficult putting a price on the rebuild take advice from the insurance company. Provide them with the dimensions, basic materials it is constructed with get help from the insurance company. A specialist who covers a lot of countries should have comparables.

Don’t forget to insure contents as well, they should be insured for their replacement value as new.

One final reminder is that most policies will provide liability cover to protect the  owner of the holiday home should someone be injured by, for example, a falling roof tile, tripping over a loose paving slab etc. if you rent out your property, or if you employ domestic staff, you should check that you have cover in place should a guest or an employee get injured.

Many of the holiday home specialists that you will find today not only cover holiday / second home property outside the UK, but also in the UK. Their policies are designed for that specialist market and one company is now offering policies for holiday home owners own UK main residence.

Of course these insurance companies are not only targeting the holiday home market outside the UK, but also some are targeting owners of main residence properties situated outside the UK. There numerous “ex pats” who have moved to Spain, France, Italy and other locations and they are often happier dealing with an insurance company back in the UK, particularly if they have language problems in the country they now live in. 

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