If you’re considering buying a nice place by the lake or up in the mountains where you won’t be living permanently, you’ll need insurance that is specific to a vacation property, a policy that is slightly different from a typical homeowners policy.
What you’ll need is seasonal and vacation property insurance, which provides coverage for accidental damage, liability, and loss. Insurers normally have a standard policy, but they will often allow you to customize the policy to meet your specific needs and situation. One thing you’ll need to consider before securing insurance is whether you plan to rent out the property in addition to occasionally staying there yourself.
Some insurers will let you add an endorsement to your primary home’s policy to cover your vacation home, and it’s often the most cost-effective way to insure your property. An issue to note with these endorsements is that the coverage level might not be as extensive as with a separate insurance policy. That is particularly true if the home is at greater risk of being damaged by natural disasters like hurricanes, brush or forest fires, or flooding.
If you’re renting out your vacation home on a monthly, weekly, or even nightly basis, note that the rentals are often considered a different type of activity than is covered under a homeowners policy, which typically does not cover vacation rental activities. Coverage does not include personal liability, either. Vacation rental insurance will cover many of the same things your homeowners insurance does but offers some additional protection.
Here are three essential aspects to consider when insuring your vacation rental property in order to better preserve the long-term future of your investment:
- Liability: Liability insurance protects you against lawsuits brought against you by your guests. The risks of liabilities imposed by lawsuits and similar claims, as well as property damage, will be covered depending on your insurance policy. In most cases, liability insurance will cover you even if you’re found legally responsible for an accident that causes injury or damage to another property.
- Building and Contents: The next biggest risk you have is the actual property itself. If your renters happen to start a fire or burn your property down, this aspect of your insurance policy will ensure your home and contents are replaced at no cost to you.
- Building Income: The third exposure you have as a vacation rental owner is business income. After all, your rental property is a business that generates income, therefore you’ll need to protect the income your business makes.
Here are some factors that can affect insurance:
- Location: Rental properties in at-risk areas may see higher rates. Unfortunately, the attributes that make a vacation property appealing will often result in higher insurance costs. The beach, for example, will be at risk for wind and storm damage as well as flooding, while a cabin in the forest can burn down during a wildfire. You need to consider the price of insurance and the possibility of higher deductibles for homes in these areas.
- Property type: Is your vacation property a single-family home, condo, or townhome? Condominiums and townhouses usually have lower insurance premiums. If general upkeep for the exterior and some interiors is covered by fees, insurance companies may factor that in while writing a policy.
- Facilities and amenities: Insurance companies take into account the extra features of a property that may expose you to more liability, such as pools and hot tubs. You can purchase extra liability coverage for these items.