Every summer you visit the same beach with your extended family; or maybe you love to spend winter holidays in the same charming ski town. Within a few years, you’re a regular at the coffee shop down the street and no longer feel like a visitor in the community. So when do you take the next step and consider actually purchasing a home away from home? And what do you need to know about insuring that home before you decide to buy?
Here are four major factors to keep in mind when insuring your vacation home:
A house near the ocean or in an area where hurricanes are common will probably have a higher risk profile than your primary residence. Work with your insurance agent to assess the risks unique to your location to find out whether you should purchase additional coverage, such as flood insurance.
For many, renting a second home when it’s not in use will be absolutely necessary in order to purchase a vacation home in the first place. If this is your situation, be sure to think through the logistics and the likelihood of renting a property regularly while you are in another location. Consider who will oversee the rental process; whether the home will need to be furnished, and whether it can be rented frequently enough. Can you cover the costs when it’s not rented out?
If you do plan to rent, you will probably require a landlord or rental dwelling policy, which provides property and liability coverage. Generally landlord policies are more expensive than a standard homeowner’s policy, because the risks associated with a rental property are greater. A landlord policy may also protect you from loss of income if you are unable to rent the property while it’s being repaired.
If you’re planning to use your second home as a furnished rental, or even if you just don’t plan to be there for a good portion of the year, there are a few ways you can protect your personal property and avoid disputes with tenants. First, make sure you have adequate personal property coverage, including riders for any special or valuable items. Inventory your second home thoroughly so that you can provide adequate documentation if your property is lost, stolen, or damaged in your absence. Finally, consider requiring tenants to purchase a short-term renters’ policy, because it’s likely that your policy won’t cover tenant’s personal property if it gets damaged.
If you don’t plan to rent your vacation home regularly, you can probably purchase an endorsement that will cover the property under your homeowner’s insurance. But before you sign on the dotted line, be sure you’re getting adequate coverage for the unique risks that come with owning a vacation home. You will want to separately insure recreational equipment like a boat or snowmobile. If you have a pool, or you plan to entertain guests regularly, you should probably increase your liability protection.