A vacation home can be a family’s most treasured asset. Whether it’s a ski lodge in Colorado, a beach house in Florida, or a small condominium in New York City—the right insurance policy is essential to ensuring your vacation home is protected. There are small caveats to be aware of when securing vacation home insurance. The expert advice below should help guide you properly when making this integral purchase.
It is very common for an individual with a vacation home to put the deed of the property in the name of a holding corporation. This provides an extra layer of protection for the property owner in the case of a liability suit. If this is your plan, make sure the insurance policy reflects the exact name of the holding corporation. A claim will only be covered if the insurable interest of the property matches the named insured on the policy.
If John Doe has an investment property in the name John Doe Property Holdings LLC, but the insurance policy is in the name of John Doe, then there is no coverage for this property. Please make sure the names match.
This is a universal trait for any insurance policy you carry whether it’s homeowners, auto, umbrella, life, etc. If it will cost you $300,000 to rebuild your vacation home, insure it to $300,000 on the Dwelling. If you purchased $100,000 of furniture and appliances for your vacation home, make sure your content limit matches $100,000.
Insuring to value is even more important for the vacation home, since you are not there every day. A pipe leaking in your primary house will likely be a minor claim because you will catch it right away. That same pipe leaking in your vacation home may cause major water damage for the length of time it would likely go unnoticed. Make sure your limits are correct to indemnify you fully when insuring your vacation home.
To go along with the same line of thought as the prior point of advice, umbrella insurance becomes more vital once you purchase a vacation home. Umbrella insurance is an excess layer of liability coverage that kicks in as soon as the limits of your primary policy are exhausted. Having a vacation property presents a major liability concern considering it is vacant for a large majority of the year. If someone decides to take a swim in your pool and severely hurts themselves, you are on the hook for that suit, unfortunately. Make sure you have umbrella limits of at least $1,000,000 to ensure that a liability claim of your vacation home doesn’t result in the loss of your primary home.
As complicated as vacation homes can be in terms of having adequate insurance coverage in all necessary areas, it’s best to work with an insurance agent or broker directly—especially someone who can view the property in person. They will see and know of certain risks you may not have considered.
Absolutely do not rent out your vacation home to anyone without notifying your broker first. Insuring a vacation home that is only used by the owner’s family is considered a secondary residence. This owner-occupied secondary residence that is not rented to others is written on a homeowner’s policy form which provides favorable rates.
The second that property is rented out, it is now subject to being written on a dwelling fire form, which is usually a higher rate, but allows the liability exposure of tenants using the property. If a tenant gets hurt in your vacation home without your broker and the insurance carrier being notified that you are renting, the claim can be denied for misrepresentation.
Another common misrepresentation people try to pull on the insurance carriers is presenting your vacation home as your primary residence. Yes, primary homes have better rates than vacation homes, but every carrier inspects the property immediately after binding coverage. The inspectors are trained to look for signs that a property is owner-occupied. If it is discovered after a claim occurs that this is a vacation home and not a primary residence, once again, the claim can be denied for misrepresentation.
Depending on where your vacation home is located, the area may be prone to earthquakes, hurricanes, floods, winter storms, or other severe weather. Be aware of flood zones and known fault lines, and don’t leave your assets at risk.
Some companies and independent brokers will give you discounts for a variety of reasons, such as insuring both your primary home and vacation home with them, proving you have made updates and upgrades to the home such as putting in new electrical wiring, new plumbing, or installed a security system, and even being a long-time and loyal customer. An insurance policy for your vacation home can be more expensive than your primary home’s policy, but it doesn’t necessarily have to be.
As you can see, there are many minor details specific to insuring vacation homes that can be the difference between a claim being fully covered or denied. Please contact a qualified broker to discuss your vacation property insurance needs. Having the proper protection portfolio for your vacation property will allow you to experience full and complete relaxation whether you are near or far from your vacation home.
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