Once you decide you’re financially ready to buy a vacation home, one important step is insuring your new pad. It’s different than buying insurance for a primary residence. Factors such as where it’s located, who stays there and what amenities are available will help determine your home insurance needs.
Your Vacation Home Versus Mother Nature
For many people, the whole idea of a vacation home is to be closer to a sandy beach or among the crisp mountain air. That perfect location for rest and relaxation may come with some additional insurance costs.
Hurricane season and intense rainstorms underscore the importance of knowing your coverage. The point applies to primary residences and vacation homes. When hurricane Florence hit in September 2018, more than 30 million people were under a flood watch and media outlets reported only about 3 percent of North Carolina and South Carolina homeowners held insurance policies.
And the cost from homeowners without insurance can be significant. When assessing the aftermath of 2017’s Hurricane Harvey, the Texas Department of Insurance reported the average cost of flood damage caused was $80,000.
You can purchase a policy through the National Flood Insurance Program (NFIP), which is run by the Federal Management Agency (FEMA), or private insurance companies.
Other natural disasters or risks associated with a given region should be considered, as well.
For areas where earthquakes or other seismic activity are common, supplemental policies to cover these risks are available. If you live in California, you also can receive it through the California Earthquake Agency (CEA).
But Hawaii homeowners affected by volcanic eruptions and related damage were less likely to find coverage.
Whether it’s one of the aforementioned risks or another threat like wildfire, the area in which the home resides can result in higher deductibles for your property.
Insuring Your Vacation Home for Guests
Renting out your vacation home is becoming more common. Homeowners do it to recover their investment and earn extra income. Unfortunately, guests can inadvertently hurt themselves or, inexplicable as it may seem, intentionally damage the property.
Don’t have enough insurance — or the right coverage? Additional headaches could follow. So, if you go this route, you’ll want to consider the potential insurance needs.
Before renting out your vacation home and selecting insurance, you’ll want to determine how often you’ll rent out the property and what service you’ll use.
Many insurance carriers will make a distinction based on how often you rent the property. If you plan to rent your vacation home occasionally, your carrier may offer a rental rider to add to your existing homeowners policy. These typically provide limited property and liability coverage.
If regular renters seem more likely, your needs could warrant business insurance.
The other important consideration is what service, if any, you will use to rent your property. Because of its large community and ease-of-use, Airbnb is a popular choice. Airbnb offers an insurance program to hosts. It would be easy for a homeowner to think they’re completely protected by the program. That would be a mistake.
It does provide coverage up to $1 million for property and liability claims. But there are still gaps. It doesn’t cover certain liability scenarios, such as assault, or protection for your valuables.
Having rental guests? Don’t guess. Contact a Bond Insurance Group licensed agent to know what coverage you need.
Insuring Your Vacation Home From Itself?
First, similar to how coverage works with your primary residence, the home’s specifications and features will affect how much your insurance costs.
How old is the home? And what materials make up its construction? A carrier will review these factors when pricing coverage.
The style of home also could dictate cost. A four-bedroom, single-occupancy house on the beach may cost more to insure than a condominium two streets away.
Not only would construction and age affect the costs, but how the property is managed could, too. Features or services provided (or not) by a property’s homeowners association, such as security, may affect cost.
Speaking of features, amenities that pose a risk could increase premiums and the need for more liability coverage. Pools and hot tubs are a prime example.
Other Implications and Getting Help
When adding up the factors that go into insuring your vacation or second home, the costs can be greater than that of your primary residence.
Keep in mind the implications. If disaster strikes and you don’t have the right coverage, your insurance company could deny your claim. Additionally, in certain scenarios, they might decide to cancel your current policy or request you switch to a business policy. The latter may lead to higher premiums.