Your second home is a valuable asset. Whether you keep it exclusively for private use or rent it out for revenue, ensuring your second is important. Standard home insurance policies only cover one home; you must purchase additional homeowners insurance for a second home. This secondary home insurance policy covers properties from a mountain cabin to a beachside condo. Read on to understand what you need to consider when securing vacation home insurance.
What Is Vacation Home Insurance?
Vacation home insurance is a type of homeowners insurance policy designed to cover second homes. These policies cover a home you own but don’t live in full-time. Insurance companies view vacation homes as higher risk because they aren't occupied full time. If most of your neighbors aren't there full time, your properties have a greater risk of vandalism or theft.
Certain vacation locations, like beachfront property in Florida or along the Gulf Coast, are also at greater risk of natural disasters like hurricanes. Likewise, second homes may have issues like a water leak or a broken window that go undetected for longer, leading to the possibility of higher insurance claims when discovered. Vacation home insurance may include full property coverage but typically only cover named perils.
How Does the Insurance Policy Work?
Vacation home insurance differs from traditional homeowners insurance, as there is an additional risk when the home isn’t occupied full time. Homeowners insurance typically only covers named perils, such as fire and smoke, lightning, explosions, theft and liability coverage.
The type of home insurance policy you need for your second home will depend on the home’s characteristics and coverage needs. Secondary home insurance coverage types include:
- Dwelling coverage
- Personal property coverage
- Personal liability coverage
- Other structures coverage
- Loss of use coverage
- Medical payments coverage
What Does a Second Home Insurance Cover?
When looking for second home insurance coverage, consider whether you only need dwelling coverage or you also need personal property and liability coverage.
Personal Property Coverage
Personal property coverage is designed to cover the home's or vacation home's content. It will help pay to replace personal belongings, like clothing, furniture, computers and appliances if damaged or destroyed because of a covered peril. Note the importance of covered perils — even with personal property coverage, you'll need to double-check the covered perils.
Dwelling Coverage
Dwelling coverage provides coverage for the physical structure. In case of damage or destruction to your vacation home, dwelling coverage will cover the cost to repair or rebuild it following a covered peril. Note that dwelling coverage typically lists specific perils such as floods, fires, storms and earthquakes.
Person Liability Protection
Personal liability protection coverage will protect you if someone gets injured at your home. In case you are found at fault for someone's injuries, or in case you are the cause of damage to someone else’s property, personal liability protection will cover it. This is true even in the case of accidental liability, such as if a tree from your property falls onto a neighbor's home. Liability coverage will often cover legal fees if a victim sues you, but it's important to confirm this.
Vacation Home vs. Homeowners Insurance
There are a few key differences between vacation home and homeowners insurance. Homeowners insurance is required by all mortgage lenders for all borrowers. Vacation home insurance may include lower contents limits because the property is left vacant for more time. Likewise, with the increased risk of burglary of unattended properties, vacation home insurance premiums may be higher than primary home insurance coverage. You can find the best homeowners insurance here.
Vacation Home vs. Vacant Home Insurance
Vacant home insurance is specialized home insurance coverage for empty houses for an extended period. While this is similar to vacation home insurance, the perils covered can vary from policy to policy, and both differ from standard home insurance.
Vacant homes carry additional risk, not only from vandalism but from common damage like a water leak or a burst pipe that might not be detected immediately. In that case, water could cause additional damage and repairs.
While standard homeowners insurance may not cover theft or vandalism, vacant home insurance typically will cover these perils. A vacation home insurance policy can also include vandalism or theft, but you must ensure it's a named peril.
If you expect your vacation home to remain empty for more than a month, it's important to contact your insurer in advance and check that you have adequate coverage for how you will use the property.
What Happens if You Rent Out Your Vacation Home
If you decide to rent out your vacation home, you may need to get a new policy. While a vacation home rental can be an excellent opportunity for additional income, you'll need adequate coverage to protect your property and your assets.
You may need additional home insurance coverage for liability, bodily injury or medical payments. You may also choose to purchase additional coverage for the home contents. This additional coverage may mean paying higher insurance premiums.
There are different policies for short- or long-term rental properties. In some cases, your insurance company may allow you to add a short-term rental endorsement to an existing policy to cover short-term rentals.
However, even if you purchase coverage for the property's contents, it will not usually cover the renter’s belongings. If you have long-term renters, you may encourage or require them to purchase a renter’s insurance policy to protect their belongings against losses. Find the best short-term rental insurance or rental property insurance here.
How Much Does Second Home Insurance Cost?
How much vacation home insurance costs depends on the property's location, size, condition and assessed value. The national average for vacation home insurance premiums is $1,687 annually for a policy that covers a $250,000 dwelling.
However, in addition to home location, the type of coverage, the insurance company and your personal rating with the insurance provider can affect premiums. Average insurance premiums vary from state to state. While average premiums in Hawaii could be as low as $400 or $677 in Vermont, premiums climb to over $4,000 in Nebraska or Oklahoma.
How to Get the Insurance Policy
Buying vacation home insurance policies is similar to purchasing standard home insurance policies. Here are the steps:
- Compare statewide vacation home insurance costs
- Check insurers’ ratings and reputations
- Look at claim response times
- Get multiple quotes to compare the best offers
- Double-check perils covered
- Consider a liability insurance add-on
- Talk to the insurer to confirm coverage and response time
- Choose the insurer and policy that best fits your vacation home
- Sign the agreement and receive the insurance policy
Find the Best Vacation Home Insurance from Benzinga's Top Providers
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Getting Vacation Home Insurance
Vacation home insurance can be costly — from less than $100 per month up to $375 per month in some states — but it's an essential expense for your second home. In case of natural disasters, theft or regular home wear and tear like a burst pipe that causes damage, vacation home insurance can reduce the amount you'll have to pay out of pocket. If you need more information, find the best homeowners insurance or the best landlord insurance.
Frequently Asked Questions
Do I need accident insurance for a vacation home?
You don’t necessarily need accident insurance for a vacation home. However, getting it can make sense if you expect an increased risk of accidents. Sometimes, the homeowners association or condo association requires it.
Can I insure my vacation home against rodents?
Homeowners insurance policies don’t usually cover rodent or insect infestations. However, you can speak with lenders offering peril coverage, which may include rodent damage.
Does an umbrella policy cover a second home?
An umbrella homeowners insurance policy may cover a second home, although that varies by lender and policy terms. An umbrella insurance policy covers excess liability coverage for both the primary and secondary residences and usually kicks in after primary coverage is exhausted.
About Alison Plaut
Alison Kimberly is a freelance content writer with a Sustainable MBA, uniquely qualified to help individuals and businesses achieve the triple bottom line of environmental, social, and financial profitability. She has been writing for various non-profit organizations for 15+ years. When not writing, you will find her promoting education and meditation in the developing world, or hiking and enjoying nature.