Whether your ideal vacation getaway is at the beach, in the mountains, or lakeside, your second home is a fun place to relax and enjoy your downtime. The National Association of Realtors estimates there are 5.1 million vacation homes in the US, and this number has been steadily rising since the late 1980s.
A vacation home can be an excellent place for your family to enjoy and make memories together, and second homes can be passed on to your heirs for generations. Some people rent out their vacation homes for part of the year and earn extra income or pay the expenses for their second home from the rental income.
Vacation homes are an investment and having the right insurance coverage in place for your second home is essential. Just like at your principal residence, things can go wrong, and accidents happen – that is why second home insurance is critical coverage to have. You probably already have homeowners insurance coverage for your primary home but will likely need a second home insurance policy written for your vacation home.
We’ll explain more about vacation home insurance in this article, including how to shop for your second home insurance policy, the average cost of second home insurance, and more. Reach out to us for more help with your second home insurance coverage.
Second Home Insurance – What is it?
Insuring your investment in your vacation home means gaining peace of mind knowing your second home is protected. When you purchased your primary home, your mortgage company or lienholder may have required you to purchase homeowners insurance. Because the mortgage company has an interest in your home, they can require insurance. The same is true if you are financing your second home.
Even if you don’t mortgage your vacation home, having the right 2nd home insurance coverage in place is critical. Your second home is exposed to storms, fire, vandalism, and other perils that insurance can help protect against. Vacation homes can also bring unique exposures, like periods of vacancy when no one is staying at the second home.
Second home, or vacation home insurance is a type of homeowners insurance coverage for property that is not your primary residence. This could include a beach house, mountain lodge, country cottage, city condo, lake house, and anything in between.
While you already may have homeowners or condo insurance for your primary home, you will likely not be able to insure your second home on the same policy since the two homes face different risks. This means you will need to purchase a separate vacation home insurance policy to handle the exposures at your vacation home.
In some cases, your insurance company for your homeowners policy at your primary residence may extend some liability coverage for you at your second home. If someone is injured at your vacation home, for example, your primary homeowners policy could extend coverage for their medical bills and your legal defense. Check with your agent to learn if your primary homeowners’ insurance policy will afford any liability coverage at your vacation home.
Things to Consider When Insuring Your Second Home
There are several things to consider when shopping for second home insurance coverage and vacation home rental insurance.
How will your vacation home be used?
Consider the occupancy status of your second home. Will anyone be living there full-time, or will you visit for holidays only? If your vacation home will be vacant and unoccupied for periods of time, this can increase its exposure to risks – unoccupied homes can be targets for thefts. If something happened like a burst pipe or broken window, it could go undiscovered for a long time while the home is vacant, causing more damage to accrue.
Conversely, homes used for vacation rentals have less risk of damage due to extended periods of vacancy. However, other risks increase when homes are rented to short-term vacationers, such as the liability risk from visitors or property damage risk from careless use.
Underwriters consider various types of occupancy classes when reviewing coverage for vacation homes and vacation rental insurance. These classes include long-term rentals, short-term rentals, family vacation homes, investment property, and homes under construction or major renovations. Each occupancy class presents different risks and exposures, so they will be rated differently by the insurance company.
Where is your second home located?
Natural disasters like wildfires, hurricanes, and tornadoes can cause different risks to your second home. If your vacation home is located in an earthquake-prone area or flood zone, you may have unique insurance needs to consider. Another factor considered by insurance companies is the home’s location compared to the nearest fire department, fire hydrant, or another source of water in an emergency. If the fire department response is delayed due to a lack of access to water or because of gated communities, seasonal roads, or other barriers to the home, this can cause the severity of fires to be greater than it otherwise would be.
Vacation and second homes are often located in extreme places as the home’s geography and natural beauty are one of their appeals. But these beautiful places can also bring a heightened risk of natural catastrophes. Your second home may need a separate policy in addition to your second home insurance policy to cover things like flood risk for a beachfront cottage or an earthquake policy if your vacation home is located near a fault line.
What Does Second Home Insurance Cover?
Second home insurance coverage and vacation home rental insurance policies are slightly different from your typical primary homeowners policy because of the different risks and exposures of second homes.
A second home insurance policy is often written on a named perils basis. Named perils basis means coverage applies to losses caused by the specific perils, or risks, listed in the policy. Other policies may be written on an open perils basis, which means any risk is covered unless specifically excluded. This is an important distinction to understand in homeowners insurance primary vs. secondary.
The average cost of second home insurance can be higher than what you are used to from your primary homeowners policy. This increased cost is due to the additional risks that second homes present, from greater natural disaster exposure to vacancy-related risks.
Your second home insurance policy should have coverage for your dwelling and contents. You may need to have additional liability coverage for your second home if your homeowners policy does not extend to your vacation home or if there are additional risks present at your second home, such as a pool or hot tub.
Check if your vacation rental insurance policy is written based on replacement value or actual cash value. If it is an actual cash value policy (ACV), your coverage will be subject to depreciation. If your policy is written on a replacement value basis, your belongings will be covered at their full replacement value – not subject to reductions for age or depreciation. Generally, an insurance policy written with full replacement value will cost more than one written based on actual cash value.
Additional Insurance Coverages to Consider for Your Second Home
In addition to dwelling, contents, and liability coverages, you may want to consider other coverages through endorsements or additional insurance policies to help protect your vacation home.
If you have a boat, jet ski, pontoon, or another type of watercraft, it may need to have its own insurance policy to protect it. Your 2nd home insurance coverage is designed to provide coverage for personal property, but that does not extend to watercraft you may own. If you have a boat at your vacation home, make sure it is properly insured for property damage and liability.
Do you have a vehicle that you keep at your vacation home? Maybe you have a Jeep or other sport utility vehicle you use for local errands and exploring unpaved roads and beaches. Even if you store the vehicle at your second home and do not drive it regularly, it still may need to be insured. Most states require insurance for vehicles that are registered and driven on the road, and auto coverage requires a separate policy from your homeowners or second home insurance policy.
Golf Cart Policy
People often assume their auto policy or homeowners insurance coverage will cover their golf cart if it is damaged or involved in an accident, but that is often not the case with standard policies. You may need a separate golf cart policy to cover the liability and property damage risks when driving a golf cart on public roads or off your own property.
Personal Umbrella Policy
Having a personal umbrella policy (PUP) adds another layer of protection and coverage for you. If the damages of a claim against you exceed your homeowners or 2nd home insurance policy, a personal umbrella policy can kick in and cover excess damages over the limits of your underlying policy that you would otherwise be responsible for covering.
The National Flood Insurance Program (NFIP), managed through FEMA, offers flood insurance policies written by several insurance carriers. These policies help protect against physical damage to your home and belongings from losses due to flooding or rising water. If your vacation home is located in a high flood risk area, your lender may require you to carry flood insurance. Your lender may require it even in a lower to moderate risk area. Flood insurance has a 30-day waiting period after purchase before it is effective. Your area must participate in the national flood insurance program to purchase an NFIP flood policy – most communities participate in the program.
How to Purchase Second Home Insurance
Second home insurance coverage can be more complicated than purchasing your primary homeowners or condo policy. Starting your search with online resources can be helpful for viewing options and learning about different carriers in the marketplace. But you may need to contact an agent to help you narrow down your options and find the right vacation home insurance. They can provide various vacation home insurance quotes to help you get the coverage you need to protect your investment.
Your agent can help you learn if your current carrier would be willing to write the insurance for your vacation home – and some carriers will only write the coverage on a second home if they also write the primary homeowners policy. Bundling the two policies or writing them with the same carrier may prove more efficient for you as the policyholder, as well.
Your second home should be a fun, relaxing escape for you and your family and perhaps a source of income when you rent it to other vacationers. But to fully enjoy your vacation home, you will need to make sure it is protected from risks. Having the right second home insurance coverage in place is essential before you start enjoying holidays at your vacation home.
We can help you review your current homeowners policy and help you find the best vacation home insurance for your second home. Contact us today to start your free vacation home insurance quotes.