How To Insure Vacation Homes

How To Insure Vacation Homes

You have purchased your vacation home! You probably spent a great deal of time and money making your vacation home the house of your dreams. As with all valuable property, you want the right insurance coverage to protect your investment. Knowing how to insure a vacation home can be a bit tricky. Here are some points to consider.

1. Where is your vacation home located?

Did you purchase a home near the water? Is your hide-away in the mountains? You must consider the location of the property in order to select adequate coverage. For example, will you need flood insurance due to ocean fronts or mountain lakes?

 2. Will the property be used exclusively by your family?

If you plan to rent out the property at certain times of the year, you will need additional coverage to protect you against damage, abuse, or liability. If you are planning to use your vacation home as part of your income, you may consider “Loss of Rent” coverage. This compensates you for rents you cannot collect due to certain types of repairs or incidents. An example of this would be, not being able to rent the house due to broken pipes.

If you expect to rent the home seasonally (not year-round) you might consider adding a “Term” rider insurance policy instead of carrying a Landlord’s insurance. This is a policy usually handled by a third party which insures the property for a set amount of money only during the rental. The cost of the rider policy can be added to the rental agreement for the property. This means the renter pays for the coverage while they are there.

3. Keeping cost down.

By adding certain features to your property, you may be eligible for special rates or discounts. Install smoke/carbon monoxide detectors, sprinkler systems, intruder alarms and fire extinguishers.

Keep your credit score high. Insurance companies often check credit scores of their customers. This is an effort to reduce the chances of excessive or fraudulent claims.

4. Know your insurance

It is important to know what you are buying. Some common terms are:

Comprehensive Property Coverage – protects you against any property loss that is not specifically excluded in your policy.

Named Peril Coverage – this protects you against things like fire, flood, hail, lightning and wind. The perils are spelled out in your policy.

Actual Cash Value – this means you are compensated for any loss at a depreciated value of the property, based on age of the item.

Agreed loss Settlement – this is dollar amount you agreed to be paid in the event of a total loss. There is no depreciation factored in (though deductibles will apply)

To secure the correct coverage on your vacation home, there is a lot to consider. A qualified agent can make the process much easier.