Owning a vacation home is a dream of many homeowners, but many come with additional risk factors that will impact your insurance rates.
- Because vacation homes aren’t primary residences—and are frequently located near bodies of water that increase flood risks—premiums are generally higher than your standard homeowners insurance.
- If you’re hoping to rent your vacation home when you aren’t using it, property and liability risks increase, and you’ll need additional insurance protection.
Many people dream of owning a vacation home: a getaway where they can escape and relax whenever the mood strikes. Vacation properties can also be great investments, depending on where they are located. If you’re in the market for a vacation home, it’s important to do the research and learn how to insure your vacation home property. Here’s everything you need to know about vacation home insurance.
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Higher Risk Means a Higher Premium
Insurers view vacation homes as having higher risk because they’re not the owners’ primary residence. This means they might not be quick to notice a simple maintenance issue — such as a leaky pipe — which could lead to expensive damage. Since these properties aren’t usually occupied full-time, they can also be at risk for burglaries and vandalism.
These factors mean that you’ll probably pay higher premiums for your vacation home insurance than you pay to insure your permanent residence. If all factors are relatively equal, you can anticipate your premium on your vacation home to be around 50% higher than your standard homeowners insurance policy.
What Does a Vacation Home Insurance Policy Cover?
A vacation home insurance policy covers many of the same things your homeowners insurance policy covers, but the policy will likely be structured differently since you don’t live there full-time.
For example, it will include protection from covered perils such as storm damage, theft and fires, but the policy might be built around “named perils only”— which means the coverage extends only to damage incurred from a peril specifically included in the policy.
In contrast, most standard homeowners insurance policies cover all perils except for those that are specifically excluded. In other words, a “named peril policy” is less comprehensive coverage.
It’s important to make sure that your vacation home insurance policy includes liability and medical payments coverage, especially if you plan on having friends or family visit. Liability and medical coverage protects you if someone is injured on your vacation home property.
Some insurance companies might extend liability and medical coverage from your primary homeowners insurance policy to your vacation home, particularly if both homes are insured by the same insurance company. Talk to your insurance agent about how your homeowners and vacation home insurance policies are structured to make sure your coverage adequately protects you.
Location, Location, Location
The real-estate adage that says three things matter when choosing a property: location, location, location. This applies to insurance, too. Where your vacation home is situated — think: by the ocean, in the mountains or near a forest — will be a factor during underwriting.
There are several reasons why location impacts how much it costs to insure your property, including how much it would cost to rebuild or repair if damaged, comparable property values and the types of weather risks in the area.
What Doesn’t Vacation Home Insurance Cover?
Your vacation home insurance will not cover damage from flooding, which is almost always excluded from standard property insurance coverage. If your vacation home is near a beach, coastline, lake or river, you will need additional flood insurance coverage.
Your vacation home might need additional coverage even if it isn’t prone to flooding. Cabins in the forest may be more susceptible to wildfires, and mountain areas can be at risk of avalanches and landslides.
Drought conditions in the West and damaging hurricanes in coastal areas in recent years have resulted in considerable losses for insurers. Many companies are tightening underwriting criteria and, in some cases, they are no longer issuing insurance policies in areas that are vulnerable to repeated disasters.
Type and Amenities
The style, age, and condition of a property and any amenities it may have can also affect the cost of your vacation home insurance. A simple cabin in the woods will cost less to insure than a cliffside, beachfront property. A condominium in a popular ski area that was built five years ago will have a different insurance cost than one built 30 years ago in the same town, because building and fire codes are different now.
Amenities matter, too. Pools and hot tubs are wonderful features to have at your vacation home, but they represent an increased liability risk. That additional risk is factored into your rate.
How Much Does It Cost to Insure a Vacation Home?
As you may have guessed by now, the cost to insure a vacation home can vary dramatically depending on your circumstances. In addition to the location and type of structure, the contents of your vacation home — such as furniture, TVs and sporting equipment — also affect your rate.
Even if the items you use to equip your vacation home are older items that you’ve rehomed from your primary residence, they still have value and would be costly to replace all at once if an accident were to happen. Take the time to accurately assess the value of your belongings in your vacation home.
Remember that one of the reasons it costs more to insure a vacation home is that you likely won’t be living there full-time. Think carefully about keeping any valuables there, such as art, antiques or a gun collection. These items require a valuable personal property rider, and the risk of those items being stolen goes up when they are kept in a place that is vacant for large stretches of time.
Renting Out Your Unoccupied Vacation Home
With the rise of internet platforms such as Airbnb that make short-term rentals easy, many property owners are wondering if they can make money by renting out their vacation homes when they aren’t using them.
As attractive as this idea is, it comes with considerable additional risk from both a property and liability perspective, so it’s very important to speak to your insurance agent about what kind of insurance coverage you will need to make certain you are fully protected.
The platforms that facilitate short-term rentals have terms of service for both hosts and guests. These terms typically prevent guests from suing the platform if something goes wrong, which means liability will often fall to the host. Some platforms offer special host protection insurance, but make sure that you read the entire policy and exclusions to understand what it covers, before assuming that it offers sufficient protection.
Your insurance agent might recommend additional liability insurance coverage, such as umbrella coverage, that will protect you beyond the limits in your existing vacation home insurance policy.
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The Bottom Line
Owning a vacation home can be an ideal retreat for you and your family. There are many things to consider when insuring your vacation home, so talk to your insurance agent or connect with an Expert Agent today to learn about what type of coverage is right for you.
Remember: If you are hoping to make some money by renting your family vacation home out on a platform, you may need additional coverage. The increased risks involved with short-term renting will likely mean you need to increase your insurance to protect you from the additional risk and liability.
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