Vacation property rental insurance advice from a local expert.

By Tony Lancaster, The Insurance Centre ~ Photo By Steve Passmore, Provo Pictures

My wife Kerry and I have lived and worked in the Turks & Caicos Islands since 1996. Prior to that we both worked in the insurance industry in London, but having been born in Jamaica I was keen to move back to the Caribbean. I missed the lifestyle and warmth of island living, and like most people born in a cold climate, Kerry was keen to experience life in the tropics. We knew within weeks that this was the right move for us, and Providenciales is now very much our home.
Since arriving in Turks & Caicos I have worked for several local insurance brokers. In 2007 I established The Insurance Centre, and have seen the company grow from strength to strength. Our aim is to provide a professional service for our clients where they can insure their businesses, homes, cars and boats in a friendly environment with a familiar face. For our clients who reside abroad, we are in a position to provide full electronic service by e-mail.

The growth of the TCI tourism sector has seen an increase in the number of home policies we write for vacation rental homes. Shortly after our move here, my wife Kerry became involved in real estate and property management, and she now manages a portfolio of high end vacation villas. Her involvement in that industry has helped me to appreciate the specific issues which affect owners of rental properties, and to be able offer an insurance product tailored to the needs of villa owners. In fact, whether they own a multi-million dollar villa, a beach cottage or a condominium, many of the issues owners face are the same.

Villa La Percha is poised over the ocean on Providenciales' south shore

Insuring rental properties and vacation homes
Here are some of the points to consider when insuring your rental property. First of all, you must make sure that your insurance company is aware that you rent your property. If you have not notified them of that fact you risk invalidating your policy. It’s a material fact that must be declared, particularly as some local companies will not write short term rental villas under home policies.
In common with other insurances your sums insured are of vital importance, and will affect the claim payments you will receive in the event of a loss. For insuring buildings your sum insured should represent the reconstruction value of your home including any costs for removing debris, architect’s fees and the like. The market value of your home has no bearing on what you should insure it for and neither has your outstanding mortgage. It’s important to insure for an adequate amount as there are severe penalties for under insurance.
Some insurance companies will want to have separate sums insured specified for swimming pools, out buildings and the like. Oceanfront docks also need to be itemized and separately covered under your policy, and they can be difficult and expensive to insure. Liability arising out of the use of the dock may also not be automatically covered and you should check the status with your broker.
For your contents cover, the sum insured should represent the new-for-old value of your home contents; the exception being clothing and linens where a depreciation for wear and tear is made. You should pay particular attention to any inner limits on your policy for valuables and other items such as electronics. This will vary from one company to another and could include both a per item limit and an aggregate limit for all items in that particular category. If you have items exceeding these limits you advise your insurance broker and ask them to be noted on your policy.
It is important that your home contents policy will not cover the personal effects of the people renting your home. Some people travelling abroad have riders on their home policies abroad covering effects outside their country of domicile, while others take out travel insurance to cover their personal effects, medical costs and the like. My wife has always felt it was a good idea to make this suggestion as part of your reservation process. She makes sure there is at least one safe in your home that can be used to secure valuables, cash and passports. She suggests you ask your property manager to cover all the security features of your home as part of their check-in process.
Unoccupancy is an issue of particular relevance to rental properties. All home insurance policies exclude certain losses if the home is unoccupied for particular periods; the periods themselves vary between insurance companies—normally between 30 and 90 days. Two of the covers which will likely be affected are water damage and theft. All rental properties will have some periods of unoccupancy throughout the year, particularly in the slow season, and therefore it’s important that you are aware of the restrictions which apply to your own policy and make arrangements for these to be removed if at all possible. Your property manager can play a vital role by carrying out periodic internal inspections of the property, ensuring that non-vital water supplies are turned off where possible and securing the home properly.

Hurricane insurance
Hurricanes represent the major peril affecting our homes. A significant proportion of your insurance premium goes towards paying for hurricane cover. Insurers offer a scale of discounts if you are prepared to accept higher hurricane deductibles, but be aware that these discounts are heavily weighted in favor of the insurance companies—weigh up the cost before accepting the discount. Most insurers will offer cover excluding hurricanes at a significant saving if you are prepared to take that risk.
In the unfortunate event that your home is made uninhabitable following an insured loss you may wish to claim for your loss of rental income. Again, each insurance policy will provide slightly different coverage and it is vitally important that you check the cover provided before a loss occurs, and ensure that your cover is adequate. Most policies will provide loss of rent cover up to a certain percentage of your buildings or contents sum insured. You may be able to pay an additional premium to increase this limit to gain higher coverage. You need to consider the amount of time it will take to make your home habitable again and calculate what you stand to lose in rental income for that period.
If you are a condominium owner, loss of rental income is not normally available as an extension of your condo contents policy; this cover should be provided under the building’s policy covering your strata plan.

Public liability coverage
Public liability coverage is a very important factor to consider when reviewing your home insurance coverage. Is the limit of indemnity sufficient ? Some home policies give as little as $250,000 cover; the majority of our policies provide a limit of $1,000,000. Most reputable property management companies will also hold their own public liability insurance to provide cover for their activities in and around your home. Don’t be afraid to ask them for a copy of their insurance certificate.
Be aware that there are some risks which will not be covered by your home policy liability cover such as the use of kayaks or other watercraft that you may have available for your guests’ enjoyment. Also if your villa is rented with a vehicle, arrangements need to be made to insure the vehicle for that purpose. Don’t assume your private motor policy will automatically provide that coverage.
There’s no better alternative to understanding the risks associated with an industry than being personally involved. Kerry’s experiences provide The Insurance Centre with an opportunity to evolve our insurance products to cope with the changing needs of our friends and clients who own and operate rental properties.
We hope you will find some of this information useful. Remember, it’s always better to address potential insurance issues before you are placed in a situation where you have to deal with them in front of a loss adjuster.

The Insurance Centre is located in Project House on Leeward Highway, Providenciales. They offer consultation on all types of personal and commercial Insurance. For advice or information about this article, contact Tony Lancaster on 649 941 4814 or email tony.lancaster@insurancecentretci.com or visit www.insurancecentretci.com.

Kerry Lancaster runs Blue Parrot Property Management, offering private villa management and concierge services. She can be reached on 649 231-8202 or at business email blueparrot@tciway.tc.