Insuring A Holiday Home Within the UK

If you own a second home within the UK and you want it rented to holidaymakers or make use of it as a second home, you will want to know the importance of making sure your investment is kept safe, even when you’re not there.

A standard home insurance policy will not usually cover a second home if it is left vacant for more than 30 days of the year – especially during periods of slow business or if you need to make repairs to the property.

The question is, if you own an apartment by the sea or a cottage in the sprawling countryside, what sort of insurances should you have in place on your UK holiday home?

Holiday Home Insurance

Holiday home insurance is specially designed for those properties that are left unoccupied for 30 days or more during a year. This is because most home insurance policies will not cover holiday homes under a regular house insurance policy due to the increase in risk.

Because you or anyone else might not be there for long periods of time, insurers will consider the property more at risk.

Empty houses may be more at risk of break-ins and vandalism in the periods between bookings, as well as being more at risk from burst pipes and storm damage, and because you as the owner aren’t based there all the time, you might not be able to remedy these issues quickly.

Buildings Insurance

When it comes to necessities, buildings insurance is a legal requirement if you have a mortgage on a second home. This covers the structure of the house, everything from the walls, ceilings, and to the rafters on the roof, but it can also cover any external buildings and other luxuries such as swimming pools.

Buildings insurance will help cover the property itself in the event of storm damage, flood damage or subsidence as a result of an extremely wet weather.

Contents Insurance

While it is not legally required, having a form of contents insurance for your holiday home is a wise investment, it helps to cover equipment, furniture, and even appliances against damage sustained by third parties – including your guests.

Because you’re not always present at the property, making a checklist of which belongings you leave when you are not there is a good idea – keep a note of any expensive equipment you might leave.

Securing these possessions against a contents insurance or gadget insurance policy can help to keep your mind at ease, knowing that they’ll be covered in the event of theft or become damaged due to the behaviour of one of your guests.

Public Liability Insurance

Because you’ll have guests staying at the property when you are not there, you need to ensure you have some Public Liability (PL) insurance in place. PL insurance helps to cover you as the homeowner in the event one of your guests gets injured or fall ill while staying at your property.

What Should Be Included?

Each insurer will be different in what they offer as part of a holiday home insurance policy, but you should be looking for the following features:

  • Accidental damage cover – helps to protect your property against unintentional damage caused by your guests.
  • Loss of income cover – helps to cover you if you are unable to rent out the property because of repairs in the event of weather-related damage or subsidence, which may have caused damage to the property and render it inhabitable.
  • Home emergency cover – gives you and your guests access to a 24-hour emergency hotline to call in the event of burst pipes or other domestic emergencies, which can then be used to arrange repairs in your absence.
  • Employers’ liability cover – if you employ a member of staff – such as a cleaner or maintenance man – and they get injured on your property, this cover will help cover legal costs if a case is brought against you.
  • Personal possessions cover – helps to cover your own possessions while they are in the home, it can be worth double checking that you don’t have similar cover elsewhere – such as gadget insurance or those offered as part of current accounts or credit cards – to ensure you don’t overinsure.
  • Alternative accommodation cover – helps to relocate your guests to alternative accommodation, such as a hotel, in the event of damage to the property that renders it inhabitable.
  • Emergency travel – if you need to travel home to carry out repairs or sort out a claim, this cover can help you to recoup some of the costs of travel expenses as a result.

As always with any insurance product, it is essential that you read the small print before you sign an agreement, as some insurers may include exclusions which may affect your policy price and level of cover.

Can I Reduce My Premium?

Much like with your regular home insurance policy, taking some steps to beef up the security of your holiday home can help bring down your holiday home policy price. Think about the following when it comes to securing your home before you start renting it out:

  • Change your current lock set for a newer, stronger set to decrease the chances of a break-in.
  • Consider putting locks on the windows to deter thieves.
  • Invest in an alarm system for when you’re not there, just remember to leave clear instructions for your guests as to how to turn it on and off again each time they leave the property vacated.
  • Buy a safe and keep it in a secure location, and use it to secure personal possessions such as spare keys and electronic devices.

Owning and maintaining a holiday home can be a long process, but by taking the time to get your insurance, you can help yourself to ease the burden and ensure that not only are your guests safe in the event of an incident but that your home is protected even when you’re not there.

What is Automatic Enrollment?

With a burgeoning ageing population that is heavily reliant on State Welfare, the UK government has introduced new reforms in which employers will now eventually have to offer a workplace pension scheme and enrol eligible workers in it.

This is called Automatic Enrollment, and it has been introduced to help people save more for their retirement.

The new system is being introduced in phases, and by 2018, all employers in the UK will have to comply with it.

While earlier, it was a matter of choice, it has now become a legality to comply with, for employees and employers.

If your financial situation does not allow paying towards an employee pension scheme, do you have a choice?

Here are some facts about Automatic Enrollment.

When will you be automatically enrolled?

As mentioned earlier, the rule is gradually being implemented. The largest employers in the UK (more than 120,000 staff) were the first ones to introduce the new rule. The medium-sized employers are now following suit. The small-sized employers will be the last ones to introduce it. In fact, Auto Enrollment has also been extended to companies with fewer than 30 people.

Depending on what category your employer belongs to, you can expect to be automatically enrolled somewhere in the next three years.

You will be informed about the exact date by your employer well in advance allowing you to plan out your finances accordingly.

The entire system is being governed by the Pension Regulator to ensure that workers are introduced at the right time.

The Eligibility for Automatic Enrollment

According to the new system, any person working in the UK above the age of 22 but under the State Pension Age who earns more than £8,105 annually will be eligible for automatic enrollment.

Workers who earn lesser or who work part-time can request to be enrolled. If they earn more than £5,564 annually, then their employer will also have to make a contribution towards their pension scheme.

If you are employed but above State Pension Age or below the age of 22, then you can still choose to opt-in your employee pension scheme.

Do you have a choice?

Yes, You do. You can read our article, ‘What Are The Benefits of Automatic Enrollment?‘ to get an idea of what you will be getting or missing out.

Employees are given a letter informing them about the starting date for Auto-Enrollment, details about the scheme and the Pension Provider.

You can then request an opt-out form from the pension provider if your financial situation does not allow you to contribute towards an additional pension scheme.

If you opt out within one month of enrollment, then you will receive a refund of any amount that you may have contributed towards the scheme.

If you choose to opt out at a later time, then any amount that you may have contributed towards the scheme will remain in your pension pot until retirement.

Employers are required to re-enroll people who have opted out after every three years. So, even if you have opted out of the pension scheme, you will be automatically re-enrolled after three years. You will then have the choice to remain in the scheme or will have to complete the opt-out procedure once again.

But opting out deprives you of the employer’s contribution towards your pension and the government’s tax relief.

What will be my contribution?

Currently, only a minimum contribution of 0.8% of your earnings will have to be paid towards the workplace pension scheme.  The employer will add another 1%, and the government will add 0.2% in the form of Tax-Relief.

However, these amounts will increase in 2017 and 2018 to a minimum of 4% contribution by the Employee, 3% from the employer and 1% Tax-Relief by the government. This will apply to anything earned above £5,824 to a limit of £42,385 including overtime and bonuses.

The funds will be accumulated in a Pension Pot and depending on whether it is a Pension firm, a government-backed organisation or an Insurance company that runs the scheme, each worker will be given options on how they choose to invest these funds.

There will be high risk as well as safer options to choose from. In exchange for the investment services, the pension provider will levy an annual charge which will be taken automatically from the pot.

Despite it sounding like a pay-cut, a workplace pension scheme has a bundle of advantages. Opting out should be the last thing on your mind.

Need an advisor on choosing the right retirement pension plans? Read our article, ‘How to Select a Financial Advisor’.

Best Prepaid Credit Cards UK

What Is A Prepaid Card?

A prepaid card is a card issued by a financial institution, secured with funds that you pre-load onto the card. For that reason, it is sometimes referred to as a ‘secured credit card’.

With a prepaid card, you are not borrowing anything – you’ll load up the card with your own funds BEFORE you can spend – sort of like a gift card… or a pay-as-you-go phone -remember them?

The money you put on the card is what you’ll have available to spend.

Prepaid cards have a 16-digit card number, signature strip and company branding and can be used to make payments like debit and credit cards, but there are some very MAJOR differences:

  • It is not attached to a bank account
  • You’re not borrowing money
  • You must pre-load funds onto the card
  • You can’t go below £0
  • You don’t need to be credit-checked to get one

 

How Does It Work?

Quite simply. Once you’ve received your prepaid card, you can add your funds. There are numerous ways to top-up, but transferring money directly from your bank account to your prepaid card is probably the most common.

You can only spend the money you have loaded onto your card in advance.

Once you’ve topped-up, you’re ready to go. Most prepaid cards are Mastercard or Visa, so you can use them to make payments online or in-store, wherever these are accepted. You should also be able to use your card to make cash withdrawals at ATMs.

How Much Does It Cost?

When comparing prepaid cards, it’s important to consider the costs. These will vary from one card to the next. There can be several different costs associated with using a prepaid card. They can include:

  • Activation fees – an initial set-up charge for you to receive and activate your card
  • Monthly (or annual) fees – a regular fee to cover your provider’s customer service and administration costs
  • UK transaction fees – you could be charged every time you carry out a transaction with your card
  • ATM withdrawal fees – you may be charged for making ATM cash withdrawals at home and/or abroad
  • Load charges – charges when you load money onto your prepaid card
  • Dormancy fees – some companies charge you if your account is inactive for a certain period of time e.g. if you haven’t used your card for a few months
  • Redemption fees – if you’ve topped-up too much and want some of your unused funds back, you could be charged to retrieve your money
  • Foreign transaction fees – charges for using your card abroad or non-sterling transaction
  • Renewal fees – just like credit and debit cards, your prepaid card will have an expiry date: you could be charged for a new card when the old one expires.

 

Prepaid cards come with the option to either pay monthly or pay as you go. Generally, the fees will be lower with a pay monthly prepaid card. With a pay as you go card you might be hit with fees each time you transact. A pay monthly card is better suited to someone who uses their card regularly, whereas a pay as you go option may be better if the intention is to use the card only occasionally.

Things To Consider:

How You Will Use Your Prepaid Card

Knowing how you are likely to use a prepaid card will help you seek out the best deal to suit your needs. Think about things like how often you’ll use your card, what for (purchases, ATM withdrawals etc), whether you’ll be topping-up one lump sum or bit-by-bit, and where you’ll use your card – at home or abroad.

The Costs

Take the time to understand the different cards available and compare the fees and charges for making various transactions. If you’re going to be doing a lot of cash withdrawals, for example, there’s no point picking a card that’ll charge you every time.

Make Sure Your Prepaid Card Is From A Reputable Company

This can be a little trickier than choosing a debit or credit card provider, where you’re usually dealing with high street banks and big brands that you’re already familiar with. Do your research and be sure to make use of online review sites like Trustpilot.

Eligibility

One of the great things about prepaid card is almost anyone can get one! There are no credit checks… you don’t even need a bank account. Most providers just need to be able to verify your identity for you to be eligible.

Who Are Prepaid Cards Used For?

People with bad credit – if you’ve got a bad credit history, you might be unable to get a traditional debit or credit card. It’s easier to get a prepaid card because they don’t require credit checks. Some prepaid cards even offer a ‘credit-builder’ card so you can begin to improve your credit rating.

Ex-pats – you could get a prepaid card even if you’ve just moved to the UK and don’t meet the criteria for a debit or credit card.

Travellers – if you’re going abroad, you could use a prepaid card instead of cash. It’s safer than carrying a large amount of cash with you, which could be lost or stolen. It has the added advantage that you can top it up as you go, so no need to take all your holiday money out at once.

Teenagers – perhaps you want your kids to have financial freedom, but worry they’ll drain their bank account? A prepaid card is one way to limit their spending. They could also be used on days out or trips instead of cash. If the card is lost, it can easily be cancelled and you won’t lose the remaining card balance.

Elderly parents – when your loved ones are getting older, it can be a worry if they are carrying large amounts of cash with them. Cash can easily be misplaced or, sadly, make people vulnerable to thieves. Having a prepaid card allows financial independence, with the reassurance that the card can be stopped if it goes missing.

Big spenders – if you struggle to manage your spending, a prepaid card can be a good way to limit yourself as you can’t overspend or get into debt.

People on a tight budget – prepaid cards make it easier to stay within a budget as you can’t spend more than your available balance.

Employers – if you want to enable employees to make purchases, up to a set limit, you can control spending with a prepaid card.

How To Apply

You can apply for prepaid cards easily online via the providers’ websites. You’ll just need to fill in your personal details. If your application is successful, your account is usually opened immediately, and your card and PIN will be sent by post to you shortly after.

Pros

  • Easy to acquire – it’s easy to be approved for a prepaid card, regardless of your credit history.
  • Cushions against debt – you can’t go below £0. If you have trouble managing your spending or keeping out of your overdraft, a prepaid card could help as you can’t spend more money than you have loaded on your card.
  • Use online, in-store or at an ATM – you can use your card to pay in shops, online or over the phone, or to withdraw cash at certain ATMs.  
  • Keep track of your spending – since the advent of Contactless, and with the carrying of cash diminishing, how many of us are keeping track of our spending each time we hold our card up to the reader? A prepaid card enables you to set yourself a limit and you can view your transactions in real-time. You will only have access to the funds available at that moment – this can be a big advantage if your prone to making large impulse purchases.
  • Basic banking – you can use a prepaid card as an alternative to a traditional bank account. You could even have your wages paid direct to your card by your employer.
  • Security – a prepaid card if safer than carrying large amounts of cash which can be lost or stolen. If you lose your card, you can request a cancellation and keep your money safe until you get a replacement card.
  • Travel – Most cards are Visa or Mastercard, meaning you can use your card around the world. Avoid having to carry lots of holiday cash about with you. You can also use a prepaid card to manage your holiday spending money.
  • Learn money management – you can use a prepaid card to learn how to manage your finances… or teach a young person or student.

 

Cons

  • The fees – this is the biggest ‘catch’ with a prepaid card. You can incur a lot of fees just for using your card normally. Give careful consideration to the way you’ll be charged for using your card – shop around and choose a card with low fees.
  • Less consumer protection – A prepaid card doesn’t give you the same level of protection as a credit card. Regular credit cards have special legal provisions to safeguard consumers and retailers against damaged/faulty goods and purchases between certain amounts respectively. This is covered under Section 75 of the Consumer Credit Act of 1974. You may still have some protection under the Chargeback scheme.
  • No FSCS protection – because, unlike a debit card, it is not attached to a bank account, you have no protection under the Financial Services Compensation Scheme. Though your money should be safe if your card provider goes bust, if the bank they keep your money in becomes insolvent, your funds aren’t protected.
  • No interest – if you put your money in a bank account, you could earn interest. There is no interest on prepaid cards.
  • No overspend – sometimes you might need a little bit extra, but there’s no facility to borrow money with prepaid cards.

 

FAQs

I have bad credit – can I get a prepaid card?

Yes. You can get a prepaid card even if you have bad credit or no credit history. There is no credit check to pass.

Can I borrow money with a prepaid card?

No. You’ll only be able to use the money you have pre-loaded onto the card.

How do I put money on a prepaid card?

It depends on your provider. You could:

  • Transfer money to your card from a bank account
  • Get your wages paid direct to your card
  • Top-up with cash at a Post Office or PayPoint location
  • Add funds from a credit or debit card