A Guide to Second Home Insurance
Many of our clients have made the decision to purchase a second home, or vacation home, some on the Cape and other places. Two common conversations come up with nearly every second home policy we write. First, why is this different from homeowners insurance? Secondly, what types of insurance are needed for a secondary home? So, let’s look at what these differences are, what insurance types are needed, and what you can do to mitigate some costs.
As a disclaimer, I will mention real estate in other places, we can usually refer you to a reputable agency for places that we do not do business.
How is Second Home Insurance Different?
Second home insurance differs from homeowners insurance in several ways. Most of these differences are simply increased risk factors and that’s what I am going to focus on.
Perhaps the biggest risk factor is that the home may go unoccupied for long periods of time. While you are at your primary residence, a storm could have ripped a hole in the roof of your second home and no one is there to address the issue. So a hole in the roof becomes water damage an mold cleanup by the time someone realizes what happened.
Another prevalent risk factor is that many vacation homes are in rural locations, like that getaway cabin in the White Mountains. Compounding the effect of being unoccupied, the risk of theft increases when the location is both unoccupied and rural.
Many people also tend to offer their second home to friends, family, coworkers, or clients. While this helps with keeping a check on the property and maintenance needs, it introduces yet another threat. Damage by a 3rd party.
Additionally, some people even rent out their second home for short periods of time. For instance, a house in Daytona may get rented out to spring breakers. Did someone say, “risk”?
So, to recap:
- Unoccupied for long periods
- Isolated rural location
Types of Insurance Needed:
Many of the insurances you will need for your second home, is the same as homeowners insurance. In most homeowners insurance policies, your coverages are:
- Other structures
- Personal property
- Loss of use
- Liability insurance
As you have probably figured out, you may need a few extra pieces in place. So, in addition to you’re typical homeowners insurance, you should consider:
- Additional theft/vandalism
- Tenant Insurance (if renting)
- Umbrella Policy
What you can do to mitigate costs:
- Install an Alarm System
- If you are leaving any valuables at your second home, then installing an alarm system isn’t only practical, it can save you money on insurance premiums.
- Combine Policies to Save
- If possible, combine your second home insurance with your primary homeowners insurance, car insurance, boat insurance, etc. By combining these and going through the same company, you can lower your premiums.
- Umbrella Policies
- Aside from the fact you are adding a valuable asset to your insurance coverages, there comes a point where having an umbrella policy just makes sense. In the event that something were to happen, like a 100 year flood that you didn’t anticipate or have covered, you may need some additional coverage. The more assets you are insuring, the higher the risk that you are exposed to one of these “freak accidents”. Maybe buying the second home doesn’t trigger the need for this, but keep it in mind.
- Insurance & Renting
- If you are going to be renting out your second home, you should inform your insurance agent. While it may seem more risky to be renting, the reality is that some of the risks associated with it being empty will be alleviated, which could translate into savings.
- Another way to save on your premiums is to require tenants to carry renters insurance with minimum amounts of coverage, as outlined by your insurance agent. In doing so, some of the risk management costs can be transferred to the tenant, again saving you money without lowering your coverage.
Choosing the right insurance agency:
As you have seen, insurance for a second home is considered higher risk than a primary home. To mitigate costs, you should consider using an agency that has access to multiple insurance companies. Not all insurance products are the same and having access to more options, as well as having a knowledgeable insurance agent, will better ensure that you have the appropriate amount of insurance at the best price possible.