Many people dream of having a second residence. If you’re lucky enough to own one, you have important considerations that go beyond normal homeownership. You’ll need adequate insurance and maintenance to keep that protection in force. We’ll look at the nuances of owning a second home here.
Insuring your secondary home
Your insurance considerations will largely depend on what type of property you have. An apartment is probably the easiest type of secondary residence to care for because renters insurance policies focus on two basic issues:
- The contents of the apartment (your personal possessions)
- Your liability for accidents due to your actions or negligence
Renters policies are affordable and can be placed rapidly. The key is having an inventory of your belongings and their value so you get adequate coverage.
With a condo, the structural risks are handled by the condo owners association’s (COA’s) master policy. It’s important to coordinate your condo owners insurance with the master policy, though. Otherwise, you could be left with surprise costs in the case of fire, wind or water damage.
Your insurance agent can read through the COA’s policy to make sure your possessions, your financial assets and any upgrades you make to the living space are covered.
You may be especially interested in loss assessment coverage. This type of coverage steps in when there is a shared financial liability that the COA’s master policy does not adequately cover. Your agent can advise you on what it will and won’t cover based on your COA’s insurance policy and the terms of your loss assessment coverage.
Townhomes and single-family homes
Townhouses and single-family secondary homes require homeowners insurance. If you own one of these types of homes, you have important clauses to consider — especially regarding vacancy. A home that is left unoccupied for months at a time is considered a higher risk than a primary residence.
If your home is only occupied part time, you may need “unoccupied home” coverage to make sure your insurance doesn’t lapse. Note that vacant-home insurance is often meant for properties that have no furnishings, such as those up for sale. Unoccupied-home insurance may be a better term for seasonally or periodically used dwellings.
Coverage for cabins also falls under homeowners insurance for secondary residences, but note any wildfire exclusions or restrictions.
If you have chosen a mobile home as your getaway, there is special coverage just for that — whether it’s on blocks or a slab. Mobile home insurance can cover a manufactured or modular home situated in a mobile home park or on a private lot.
Like other home insurance products, it covers the structure, the structure’s contents and your liability. And you can usually pick from an agreed-loss policy or a replacement cost policy. An agreed-loss policy pays up to a preset amount, and replacement cost policy allows you to replace your mobile home in the event of a total loss.
Most of these secondary home policies don’t cover earthquakes or floods, and in some regions, wildfires and hurricanes are also excluded. In most cases, these protections can be bought separately or added to your policy by “endorsement.” Your agent can show you your options and help you assess your risk level.
One other important coverage is sewer and drain backup. Nasty water can bubble up at any time, leaving a mess to clean up. And that isn’t covered under standard vacation home insurance. Sewer and drain backup coverage hardly costs anything to add to your policy.
Security and maintenance
With secondary homes, insurers want to know how much attention, maintenance and security the property receives. In some locations, theft and vandalism are high-level risks, especially for homes that are vacant for extended periods. And in all cases, water leaks and fires are serious concerns.
The good news is that you can reduce your risk with affordable technology, and such loss control measures may reduce your insurance premiums. Some insurers will even provide or help you purchase fire and water sensors that are connected to internet apps and send alerts. The more advanced devices can even be activated to turn off water valves or dial the fire department.
Having a local property manager is also a good idea. They can make regular visits while you are away and handle routine maintenance requests as they pop up. They can also make a property look lived-in by simply grooming the yard and porch and adjusting light timers.
Know that damage from critters is not covered under standard homeowners insurance, which is another reason to have a property or maintenance professional nearby. Wear and tear and neglect are also excluded from coverage.
For example, say a tree limb falls and pokes a hole in your roof. If you don’t repair the hole, rains may invade and cause substantial damage that will not be insured.
Home-sharing and renting
If you intend to let others borrow or rent your vacation home, inform your insurance agent. Guest usage isn’t usually a problem, but your insurer may require you to disclose extensive permissive use. Using the property for income may also create new insurance requirements, such as landlord insurance.
If you are going to rent your property often through Vrbo or another online booking agent, consider vacation rental insurance. This covers your risks as a homeowner and as a landlord. You need to consider how to protect yourself from income loss as well.
However you handle your vacation property, get a professional appraisal to obtain the right amount of insurance. Underinsuring your home can leave you liable for costs you didn’t expect, well beyond your deductible. For example, your city may require you to make upgrades due to updated building codes. This special coverage, called ordinance and law insurance, can help you build a new roof or even fully rewire your home.
It may sound like a lot to consider, but protecting your investment will give you peace of mind and help you recover if catastrophe strikes.
This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem.
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