Holiday home insurance Portugal: Your essential guide

Situated on the South Western coast of Europe between Spain and the Atlantic Ocean, Portugal has some of the most stunning coastlines in Europe. In the south of Portugal, the Algarve is extremely popular and perhaps the image that most holidaymakers have of Portugal. With its miles of unspoilt beaches overlooking the Mediterranean Sea, it's easy to see why this is a perfect holiday home destination.

Whether you're looking for a villa in the Algarve, or a city flat in charming Lisbon, having the right insurance is essential. It gives you financial protection and peace of mind, so you can relax knowing your property is covered against unexpected risks.

In this guide, we’ll explain everything you need to know about holiday home insurance in Portugal, from cover options to legal requirements, and how to save money. Keep reading to find out more!

What's covered:

• What is Portuguese holiday home insurance?
• Is holiday home insurance a legal requirement in Portugal?
• What insurance do I need for a holiday home in Portugal?
• What insurance do I need for a holiday let in Portugal?
• What are the legal requirements for holiday lets in Portugal?
• Is holiday home insurance expensive?
• 6 ways to save on your Portuguese holiday home insurance
• Your next step
• Key takeaways
• FAQs

Are you looking for holiday home insurance for your property in Portugal? At Howden, our team of trusted experts can help you find a policy that’s the perfect fit for you.

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What is Portuguese holiday home insurance?

Portuguese holiday home insurance covers second properties in Portugal that are used as holiday homes. These specialist policies are designed to protect your property against the unique risks and challenges associated with owning property abroad.

Given that second properties are often left unoccupied for long periods or rented out to paying guests, they are exposed to increased risks. These could include theft, fire and flooding, water leaks, or guest-related damage. That's why having the right insurance in place is essential for all Portuguese holiday home owners.

Is holiday home insurance a legal requirement in Portugal?

This depends on how you plan to use your property:

For personal use

If you plan to use your holiday home for personal leisure and don't plan to rent it out, you're not legally required to have insurance. However, there are two common exceptions:

• Mortgage requirements: If you’ve taken out a mortgage on your holiday home, most lenders require buildings insurance as a condition of your loan.

For holiday lets

• Public liability insurance: Required for all properties in Portugal, covering damage or injury caused to guests or third parties. Typically included in a comprehensive holiday home insurance policy.

• Fire insurance (seguro de incêndio): Also required for all properties in Portugal, protecting the structure of your holiday home from fire damage and related risks. This is automatically covered by your holiday home insurance policy.

What insurance do I need for a holiday home in Portugal?

Just like standard home insurance policies, there are three types of cover to choose from: buildings, contents, or a combined buildings and contents policy. It's strongly recommended to take out buildings and contents insurance as the bare minimum.

Portuguese holiday home insurance typically includes buildings and contents insurance, as well as public liability cover, as standard. Your holiday home insurance cover will also likely include some or all of these additional cover types:

• Unoccupancy cover

• Accidental damage cover

• Alternative accommodation cover

• Emergency travel costs cover

• Legal cover

If you plan to let out your property:

• Loss of rental income cover

• Domestic staff cover

Note: If your holiday home insurance doesn’t already include these features, you can usually add them as optional extras to make sure your cover fits your needs.

Let's take a look at each cover option in more detail:

Buildings insurance

Buildings insurance protects the physical structure of your Portuguese holiday home, along with permanent fixtures, against risks such as fire, storms, flooding, earthquakes, and vandalism.

Remember: If your property in Portugal is mortgaged, buildings insurance is normally a requirement by lenders.

Contents insurance

Contents insurance covers the items inside your holiday home, such as furniture, appliances, and personal belongings, against loss or damage.

Escape of water or oil

Typically included as standard, this cover protects against damage caused by leaks from water pipes, heating systems, or household appliances. It applies to both structural elements (walls, floors, ceilings, and built-in fixtures) and the contents of your home.

Public liability insurance

Public liability insurance protects you if a guest or any third party suffers an injury or their property is damaged while staying at your holiday home.

Public liability cover is a legal requirement in Portugal for holiday lets. Most Portuguese holiday home insurance policies include this cover as standard.

Accidental damage cover

This option provides protection for your property and its contents against accidental damage, including incidents caused by guests if you let out your holiday home

Unoccupancy cover

Holiday homes are often left empty for extended periods of the year, leaving them exposed to increased risk of theft, leaks, and other issues.

Unoccupancy cover extends cover for longer periods, often up to 60 days or more, subject to certain conditions such as removing valuable possessions. Always check your policy for exclusions.

Legal cover

Holiday home legal insurance provides cover in the event of a legal dispute related to your holiday home in Spain. This could include:

• Contract - If you have a dispute about:

• Buying or renting out your holiday home for leisure purposes,

  • buying or hiring,

  • your tenancy or a lease where you are a tenant or lessee.

• Property - Against another party who causes damage to your holiday home, nuisance or trespass.

• Tax - To have help from an accountant if HMRC investigate your personal tax affairs.

• Legal defence - For the cost of legal representation if you are investigated for or charged with an incident arising out of the letting out of your holiday home.

Alternative accommodation cover

If your holiday home becomes uninhabitable due to an insured event, this cover pays for temporary accommodation so you and your family have somewhere to stay during repairs.

Also read: The importance of alternative accommodation cover

Emergency travel costs

This cover reimburses the cost of travelling to your holiday home in an emergency, such as a burst pipe, fire, or storm damage.

What insurance do I need for a holiday let in Portugal?

If you plan to use your Portuguese property as a holiday let, you’ll be responsible for guest safety and any third-party property damage. As we've mentioned, public liability insurance and fire insurance are legally required for holiday lets in Portugal - both of which are typically included in your holiday home insurance.

The following cover options are also highly recommended if you plan to rent out your holiday home:

Loss of rent cover

If your property is damaged by an insured event such as fire, flooding, or storm damage, loss of rent cover reimburses you for lost income, such as from cancelled bookings.

Domestic staff cover

Domestic staff cover protects you if domestic staff are injured or become ill while working. This cover includes medical and legal costs.

What are the legal requirements for holiday lets in Portugal?

Holiday homeowners planning to rent out their property in Portugal must also comply with several legal and safety obligations. These include:

Licensing and registration

• Alojamento Local (AL) licence: Register your property with your local town hall (Câmara Municipal) to obtain an AL licence and registration number.

• Tax registration: Register your rental activity as a commercial activity with the Finanças (tax office). You’ll need a Portuguese tax number (NIF) for this. You'll also need to declare and pay tax on rental income in Portugal.

• Advertising rules: Your AL registration number must appear in all listings and advertisements.

Health and safety

• Property inspection: Your home will be inspected to confirm it meets legal safety requirements.

• Fire safety: You must provide fire blankets, extinguishers, smoke alarms, and a first aid kit.

• Utilities compliance: Gas, electricity, and water systems must meet safety standards, including proper ventilation and hot/cold running water.

• General standards: The property must have suitable furniture, equipment, and security measures to ensure guest comfort and privacy. you'll also need to provide emergency contact information for the guests.

Guest information

• SEF reporting: You are legally required to report the entry and exit of all foreign guests to SEF (Serviço de Estrangeiros e Fronteiras) via the SIBA online portal.

• Guest identification: You'll need to collect valid ID documents (e.g. passports or ID cards) from guests for the SEF report.

Remember: If you earn rental income from a holiday home abroad, you must declare it to HMRC. UK residents are required to pay tax on income from overseas properties.

Is holiday home insurance expensive?

Insuring a holiday home in Portugal is often more expensive than insuring a property in the UK, for example, due to additional specific risks. The cost can also vary between insurance providers.

Insurers calculate premiums for Portuguese holiday homes based on several factors, including:

• Location of the property

• Type and size of the property

• Rebuild value

• Security measures in place

• Value of your contents

• Claims history

• Risk of loss or damage

In general, properties considered higher risk tend to attract higher insurance premiums.

6 ways to save on your Portuguese holiday home insurance

Rest assured, there are still ways to reduce the cost of your holiday insurance. Here are six practical tips:

1. Regular upkeep

Keeping your property well maintained helps prevent wear and tear and protects it from weather-related damage. This reduces the likelihood of making a claim, which can help keep your premiums lower.

2. Improve your security

Simple steps to improve your holiday home's security such as installing a burglar alarm, window locks, security cameras and security lighting can prevent theft and may reduce your insurance costs.

3. Increase your excess

Choosing a higher excess can lower your premium, but make sure it’s an amount you can comfortably afford if you need to claim.

4. Choose a single insurance provider

Using a single insurer for your buildings, contents insurance, and any extra cover is usually cheaper than taking out multiple policies with different insurers.

5. Pay annually

Paying your premium in one lump sum annually is usually more cost-effective than monthly payments.

6. Compare quotes

Shop around online and compare holiday home insurance quotes before committing to one policy.

Your next step

Are you looking for holiday home insurance for your property in Portugal? Whether it's for personal use or holiday lets, at Howden, our team of trusted experts can help you find the right cover for your needs. Get a quote today or call us at 0117 403 3000

Holiday home insurance Portugal: Key takeaways

• Holiday home insurance is a specialised policy specifically designed for second properties used for leisure or short-term rentals.

• For holiday lets, public liability insurance and fire insurance are legally required, while for personal use, insurance isn’t mandatory unless your property is mortgaged.

• Policies usually include cover for both the building and it's contents, public liability insurance, as well as a range of additional cover options such as accidental damage, emergency travel and alternative accommodation costs.

• If certain cover options aren't automatically included, you may need to pay extra to add them to your policy. Always check the policy wording first to see what's included.

• You should also consider loss of rent cover and domestic staff cover (covering medical and legal fees for staff) if you plan to rent out your holiday home to paying guests.

• You'll need to follow the legal obligations for holiday lets in Portugal, including getting an AL licence, tax registration, and following health and safety standards.

• For UK residents, any extra income generated by properties abroad need to be declared to HMRC.

• Holiday home insurance is typically more expensive than regular home insurance due to additional risks.

• There are several ways to save money on your insurance, including increasing your excess, paying annually and meeting security requirements.

Hear from our insurance expert…

What’s new or changed in the holiday home insurance market which I should be made aware of?

"One of the most common claims on holiday homes is for escape of water e.g. pipes bursting. Holiday homes tend to be left unoccupied for longer periods, so any damage may not be found quickly, resulting in high claim costs - especially with the cost of construction/living in recent years. Holiday home insurers have started increasing their escape of water excess to reduce claims, so if you are adding a voluntary excess, check if that’s on top of the escape of water excess."

Rob Neal, holiday home insurance expert.

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