How to insure your second home

About to buy a second home? Congratulations! A property by the sea, in the mountains or in the countryside is your ticket to weekend getaways, holidays with all the comforts of home and the promise of a relaxing retirement. We bet you can’t wait to pack your suitcases, but don’t forget that you’ll need to handle a few formalities first. This includes taking out fully comprehensive home insurance.

Insuring your second home is something you should discuss in depth with a subject-matter expert. It’s too broad a topic to cover exhaustively here, so in this article the myLIFE team will simply try to draw your attention to the main points you’ll need to consider.

Outside Luxembourg

The first point to note is that home insurance is not a legal requirement in all countries. It’s important to find out what the law says in the country where your property is located. That said, we strongly recommend that you take out home insurance on your property regardless of whether or not it’s mandatory. This is even more crucial if you only stay at the property from time to time.

Without wishing to be the bearers of bad news, we should point out that second homes often make easy targets for burglars and vandals. What’s more, if an incident occurs, the time it takes for you to find out about it may make the damage worse. In circumstances such as these, insurance will stop an annoyance from turning into a financial disaster. Insurance will also protect you if your neighbours suffer damage, because your insurer will compensate them.

Within Luxembourg

If your second home is located in Luxembourg, all you have to do is contact your insurer to ask for an extension of the policy on your primary residence. If your property is located outside Luxembourg, you should bear in mind that your local company won’t be in a position to insure it. You’ll be directed to one of your insurer’s foreign partner organisations or a sister company if your insurer is the Luxembourg subsidiary of an international group.

Don’t forget to assess the risks associated with the geographical location of your second home.

Find the solution that suits you

Whether you decide to take out insurance with the bank handling your mortgage or to approach an insurance company directly, you’ll need to find the solution that’s best suited to your needs and to the location of your second home. As a first step, we recommend drawing up an inventory of your contents and estimating how much they’re worth to calculate the maximum refund. Don’t forget to assess the risks associated with the geographical location of your second home. If your second home is a villa in the foothills around Nice with no direct neighbours it won’t be subject to the same risks as those affecting an apartment in a holiday complex in the mountains.

Take the time to think through all these factors and bear them in mind when choosing the solution that’s right for you. You may want to ask your neighbours at your second home about the policy they chose if their situation is similar to yours. Above all, you should ask as many questions as possible when you meet the expert whose policy you are hoping to take out.

Never assume that a risk is covered by default. Check before you sign on the dotted line – it’s always better to be safe than sorry!

Fully comprehensive home insurance

Fully comprehensive home insurance should always cover you against major risks such as fire.

In general, insurance companies also cover the following risks:

• family civil liability (normally already included in your policy on your primary residence, so you shouldn’t need to take out a separate policy);
• window breaks and cracks;
• property civil liability, electric and electronic fittings;
• legal protection;
• home insurance;
• fire and related dangers;
• theft;
• storm, hail, pressure from snow and ice, earthquakes;
• electrical damage;
• consequential loss;
• water damage and damage to contents;
• etc.

If you have specific requirements, you can also take out optional cover. Whichever option you choose, you should discuss all of this with your insurer or banker so that they can provide the best solution for you. Never assume that a risk is covered by default. Check before you sign on the dotted line – it’s always better to be safe than sorry!

Other types of insurance

As well as insurance covering risks linked to your home itself, you should also consider other types of risk such as those associated with financing your second home.

For example, mortgage protection insurance would fully or partially pay off your mortgage if you were to pass away. This type of solution has major benefits for your loved ones because they would be able to carry on enjoying your second home. It’s also worth giving serious thought to this option when you plan your will. Make an appointment with your bank adviser or insurer to set the terms and conditions (principal, policy term, payment frequency) if this was not part of the original discussion about your mortgage.

You may also decide to add optional disability or accident cover. Lastly, endowment policies pay out a guaranteed lump sum on maturity, or earlier if the insured party passes away.

If you plan to use your property for short-term lets, we recommend that you take out fully comprehensive home insurance.

If you plan to rent out your second home

Some people choose to rent out their property over the holiday season, for example to pay for the upkeep or to increase the returns on their investment. From an insurance perspective, it makes a difference whether you are renting out your residence for short or long periods.

For long-term lets, you can take out building insurance and ask the tenant to take out contents insurance, as you would if you were renting out your property as someone’s primary residence. If some countries, the prevailing legislation requires tenants to send a copy of the insurance policy to the owner. Don’t forget to check this. If you plan to use your property for short-term lets (a few days or weeks), we recommend that you take out fully comprehensive home insurance. Contact your insurer, who will be able to offer you tailored advice and help you decide on the cover you require.

In summary, fully comprehensive home insurance may not be a requirement in the country where your second home is located, but it is a vital tool to protect your home and its contents. Your banker or insurer will be able to help you find the solution best suited to you and your situation.