Vacation Home Insurance: How to Insure Your Second Home
Owning a vacation home may be one of your major financial goals, and it's critical to ensure that your investment is secure. Having the right homeowners insurance can protect your vacation home from damage caused by fire, wind, and other perils. To cover a second home, you'll almost always need to purchase a separate policy.
If you have a mortgage on your vacation home, your lender may require property insurance as a condition of borrowing.
What Is Vacation Home Insurance?
If you intend to purchase a second or vacation home, you will almost certainly require vacation home insurance. This is a homeowners insurance policy that protects a home that you own but do not live in full-time.
Insurance companies typically consider vacation homes to be higher risk because they are not occupied all of the time. If you own a beachfront home, for example, the risk of theft or vandalism is higher if you and your neighbors only visit on a regular basis. Similarly, it may take longer to detect water damage in an unoccupied second home, increasing the likelihood that the insurance company will have to pay out a claim for damages.
What Does Vacation Home Insurance Cover?Â
A vacation home insurance policy is not the same as standard homeowners insurance because the home is not occupied all of the time. Instead of covering everything that a typical homeowners policy might cover, your insurance company may tailor your policy to only cover specific perils.
This means that the policy for your second home will cover a specific set of events, which may include damage from:
- Fire and smoke
- Lightning
- Explosions
- Theft
Liability coverage, which would cover any personal injuries sustained by someone while on the property, may also be included. Medical payments coverage may be included in the policy to pay for someone's medical bills if they are injured. However, if you already have a homeowners insurance policy in place for your primary residence, your insurer may be willing to extend those coverages to a vacation or second home.
How Much Does Vacation Home Insurance Cost?
Depending on the type of coverage you require, vacation home insurance may end up being more expensive than regular homeowners insurance. A variety of factors influence your premium costs for home insurance, including:
- Location—Premiums for vacation or second homes in areas prone to flooding, hurricanes, or other natural disaster-related events may be higher. A home in an area prone to earthquakes, forest fires, or mudslides may also be more expensive to insure.
- Condition and Age—In addition to location, insurance companies consider the age and overall condition of the home when determining premiums. A neglected older home in terms of maintenance or upkeep will typically cost more to insure than a newer or well-maintained home.
- Property Type—When obtaining vacation home insurance, the type of home can also make a difference. A small mountain cabin, for example, may be less expensive to insure than a three-story beachfront home. The amenities of the home can also make a difference. Having a pool on your property, for example, can result in higher premiums because pools increase risk for insurers.
It's important to remember that depending on where the home is located, vacation home insurance may also necessitate secondary coverage. If you own a beachfront home or a second home near a lake or river, you may require separate flood insurance coverage. Keep in mind that flood insurance may have its own limitations in terms of what is and is not covered.
If your vacation home is vulnerable to hurricane damage, make sure you have adequate coverage in place to protect your investment. While your standard vacation home policy may not cover all hurricane damage, hurricane policies do.
Renting Out a Vacation Home
When you need to get away from the hustle and bustle of everyday life, owning a vacation home can be ideal. You might also consider it a potential moneymaker if you can rent out the house when you're not using it. However, you should be aware that doing so may necessitate the purchase of additional home insurance coverage for liability, bodily injury, and medical payments. Furthermore, having more coverage means paying a higher premium to insure your second home.
You may require short-term or long-term rental insurance depending on how long the home will be rented. It's possible that your insurance company will allow you to add a short-term rental endorsement to an existing policy.
You should also be aware that rental coverage protects you as the homeowner but not the personal belongings of your renter. As a result, it may be prudent to encourage renters to obtain their own renter's insurance policy in order to protect themselves against losses.
How to Buy Vacation Home Insurance
Purchasing insurance for a vacation or second home is similar to purchasing homeowners insurance for a primary residence. It all starts with some comparison shopping. When comparing policies from various insurers, it is useful to consider:
- What is and isn’t covered
- Any exclusions related to specific property types or on-site amenities
- Deductibles and premiums
- Discounts that you may be able to use to lower your premium costs
You may be able to reduce your premiums for second home insurance by bundling policies or installing a home security system, depending on your insurer. Similarly, your insurer may provide discounts for installing smoke or carbon monoxide detectors. Before you buy, inquire about these and other discounts that may be available. This will help you find the best deal on vacation home insurance.