Vacation homes have different and unique exposures than your primary residence. If you want to protect your investment from property and liability risks, having the right coverage is critical. Whether it’s a beach house or a lakeside cabin, you should consider investing in vacation home insurance.
Vacation Home Risks
Vacation homes are often in areas where wildfires, flooding or hurricanes are a possibility, so the risk of severe property damage may be high. Additionally, vacation homes often go unoccupied for long periods of time, further increasing this risk. Although having guests stay in your vacation home may seem like a safe way to keep the place occupied and monitored, this comes with risks as well. Consider the following scenarios:
- A leak develops in the roof. No one is there to see the roof, so water damage accumulates over a period of weeks, leading to mold and structural damage.
- Children in the area play on your property while no one is there. One of the children gets injured and the parents sue the owners.
- Squatters enter the unoccupied house. They cause damage to the property by starting a small fire.
- You invite friends to use your vacation home. While the guests are there, one of them falls in the shower and is injured.
- Raccoons get into the attic. Because no one is there to remove them, raccoons damage the roof and ventilation.
Can you insure a vacation home under your homeowners’ insurance?
If you have a second home, you will likely need a second homeowners’ insurance policy. The insurance policy that you purchased for your primary residence likely won’t cover property damage to your vacation home. Furthermore, if you’ve financed your vacation home, your mortgage lender will likely require you to purchase a separate home insurance policy for it.
You will need to pay an additional insurance premium for this policy. The cost will depend on multiple factors, including the location of the second property and your coverage limits.
Vacation Property Insurance vs. Homeowners’ Insurance
According to Investopedia, insurance policies for vacation homes tend to be a little different from a standard homeowners’ insurance policy. Vacation homes may be seen as riskier and, as a result, some vacation home insurance policies may offer property coverage on a named-perils basis. This means that only the perils specifically listed in the policy are covered.
Some vacation property policies may provide all-risk coverage, which means perils are covered unless they’re listed in the policy as being excluded. If this option is available and affordable, it may provide more protection.
Renting Your Vacation Home
Airbnb, Vrbo and similar marketplaces have made it easier than ever to rent out your vacation home so you can earn extra income. This may seem like a logical way to get more use out of your vacation home when you’re not using it. However, there are risks and insurance considerations if you plan to rent your vacation house.
Some guests will be responsible and leave your property in good condition, but other guests could create nightmare scenarios. For example, guests could:
- Throw destructive parties
- Cause kitchen fires, break doors, clog toilets and cause other types of structural damage
- Break or steal your private property, such as furniture, bicycles and dishes
- Refuse to leave when their stay is over
- Injure themselves
Given these and other risks, it’s important to make sure you have suitable liability and property insurance. The home-sharing platform you use may provide some coverage, but there may be limits and exclusions that leave you with coverage gaps. Using your vacation home for commercial reasons will likely either impact your home insurance policy or require a second commercial property insurance policy. In cases like these, work with your insurance broker to determine your best course of action.
Liability Coverage for Vacation Homes
Your homeowners’ insurance policy for your primary residence might extend some liability coverage to your vacation home. However, you should not assume that because some coverage exists, you don’t need separate liability coverage for your vacation home.
Vacation homes can involve significant liability risks, especially if they are rented out or have swimming pools, so carefully review coverage with your insurance broker to ensure sufficient protection. Your broker may advise you to purchase a vacation home policy that includes liability coverage or even a personal umbrella policy for an added layer of coverage.
Risk Management Practices for Your Vacation Home
Purchasing a vacation home can be a great investment for you and your family, and taking proactive steps can help you avoid problems that could undermine that investment.
- Research the risks before buying. It’s smart to look at the risks in an area before buying any property, whether it’s your primary residence or a second home. Look up information on wildfire, hurricane, flood, tornado, wind, winter storm and earthquake risks. If you decide to buy a vacation home in an area with substantial risks, see if there are any home improvements that could help protect your house during a severe weather event.
- Keep your property well-maintained and monitored. Since you won’t always be around, you may need to hire a local service to perform regular landscaping and upkeep. It’s also important to have someone check out the property regularly for signs of pests, vandalism, roof damage and other issues.
- Watch out for attractive nuisances. Attractive nuisances are elements that children find appealing but that can be dangerous, such as swimming pools. If children are injured on your vacation property, even if they are there without your permission, you could be held liable.
- Install a security system. Unoccupied vacation homes may be targets for vandals and squatters. Security cameras and an alarm system may help keep your vacation home safe from intruders.
- Use a smart leak detector. Leaks that go unnoticed can waste water and cause property damage. A smart leak detector can help you identify leaks as soon as they start.
- Turn off the water supply. When the vacation property is unoccupied, turning off the water supply could help prevent water damage from burst pipes and leaks.
Need help protecting your vacation home?
Higginbotham’s team can help you review your vacation home exposures and secure appropriate vacation home insurance to help protect your property. Talk to a personal insurance specialist today.
