Owning a second home—whether for vacation, rental income, or a combination of both—can be immensely rewarding. However, it also comes with its own unique set of insurance needs. In this post, we’ll explore the various coverage options available for second homes and why they are crucial for protecting your valuable investment.
Standard Homeowners Insurance Package: A Starting Point
At a minimum, your lender will require that you carry hazard insurance to protect your property against damage from fires, earthquakes, or severe storms. Additionally, it is wise to add liability insurance, which covers you and members of your household for accidental injuries to your visitors. Opting for property plus liability insurance adds up to a standard homeowners insurance package. For an extra layer of protection, a personal umbrella liability policy extends your liability coverage for properties named in the policy.
Dwelling Fire Insurance: A Vital Alternative
Since most homeowner policies require occupancy as a condition of insurance, the fact that you visit infrequently may preclude you from obtaining full homeowners coverage. In this case, Dwelling Fire Insurance is a key alternative.
This policy continues to offer coverage for a home and other structures (e.g., detached sheds or garages) for perils named in the policy. Named perils typically protect against damage caused by fire, collapse, lightning, wind, hail, explosion, and smoke. For more comprehensive protection, consider adding personal property protection and liability insurance to a dwelling fire policy.
Renting Out Your Second Home?
If you are renting out your second property, whether an apartment unit or a family home, you will have little control over the physical damage that can occur in or on it. To mitigate your risks, Tenant-Occupied Dwelling Insurance will cover the costs incurred by damage, including fire, storms, burglary, and vandalism. However, this does not cover your tenant’s personal property.
Renting your property, furnished or unfurnished, also has insurance coverage implications. If you are renting your property furnished, it’s important to communicate this to your insurance agent, who can advise you on the best coverage options and whether you need to consider requiring longer-term tenants to carry additional renters insurance.
Cost Considerations
Owning a second home, whether reserved for your private use or shared as a rental, generally costs more to insure than your primary residence. Premiums are based on various factors, such as the amount of time the home will be unoccupied, its location, and the liability from renting the property.
Depending on the location and type of second home, risks of hurricanes, wildfires, or even a pool can push up your premiums or make coverage difficult to obtain.
Protect Your Investment
As with all homeowners insurance, it is important to ensure that there is enough coverage to protect all of your property values and assets when purchasing coverage. Before making the leap into second homeownership, we strongly recommend consulting with an insurance professional.
If you are considering the purchase of a second home, contact us to learn more about the cost of insuring the property and to get a tailored solution that suits your needs and budget.
