You’ll want to protect your second home just as you would your primary residence, but doing so can come with some key differences. No two homes are alike and the differences between your primary home and your vacation home are often substantial. There are plenty of different factors including the age of a home, the weather patterns in the area, local crime rates, and more that will determine the proper coverage needed and the amount you’ll pay in premium.
Some homeowners insurance policies will allow you to extend certain coverages to your second home and others will not. Depending on the characteristics of your vacation home, you may need different coverages to avoid gaps and protect not only your home but also your personal possessions. There are plenty of things to consider and homeowners with multiple homes should take these factors seriously to avoid having to pay out-of-pocket down the line. Let’s review some of the biggest differences in home insurance for second homes and how you can stay protected for less.
Purchasing a Home Insurance Policy for Your Second Home
To protect the structure of your second home and the contents inside, you’re more than likely going to need a separate home insurance policy. Purchasing a separate policy will help you avoid costly coverage gaps and stay protected during times you need it the most. If you are using a mortgage to purchase your vacation home, there’s also a high possibility that your lender will make home insurance a mandatory condition of the loan. Here at TGS Insurance, whether it is your primary home or secondary home, we always encourage homeowners to stay protected with the right policies for their needs. In some cases, you’ll be able to extend the liability protection from your home insurance policy to your second home but this varies by insurance brand. This is important coverage that can cover the medical and legal fees of parties who are injured while visiting your vacation home. By working with top-rated insurance carriers, we’re sure to find the right coverage for your needs no matter what they are!
Considerations for Your Vacation Home’s Coverage
Vacation Homes Come With More Risk
The first thing we need to address is the amount of risk that goes into covering your homes. Risk is the ultimate decider of how much you’ll pay in home insurance premiums each year. Homeowners with more risk can expect higher bills while those with fewer risks will pay less. In general, second homes carry more risks than a primary residence for several reasons:
- They are often in areas where perils such as flooding may be an issue (Example: You’ve purchased a vacation home near a lake or beach).
- Your primary residence has occupants who can help deter, prevent, and limit perils such as theft.
- Expensive features can raise your premiums due to their expensive nature of replacing or restoring in the event of a loss.
- If you rent your vacation home to others you’ll also need to report this to your home insurance provider as it will affect how they assess the amount of risk your second home has.
These are some of the differences in risks homeowners should be aware of. They’re also some of the reasons you may receive a more limited form of protection for your vacation home.
A Difference in Coverages
The way your home insurance protects your home versus your second home is different because the risks are different. A standard home insurance policy known as an HO-3 policy uses a covered perils approach. This is much more broad coverage which can protect your home and valuables against sixteen named perils on your policy. It will also protect against other structures on your property from the same perils mentioned in the policy.
Secondary homes don’t contain as many personal possessions and can provide a more limited version of protection as a result. You’ll also receive less coverage on other structures on your second home’s property such as a shed or detached garage. Because of the limitations, you may find with your policy, there are several coverage options you should be aware of and open to for proper protection.
Coverage Options That Keep You Protected
Vacation homes often come with unique challenges that require the right coverage options. Insurance companies view these homes differently and will be similarly protecting them as your home but differences will still arise. Take a closer look at important coverage options that can help you gain peace of mind:
- Location is always a huge factor for insuring any home but second homes amplify the matter. Knowing the types of weather perils your vacation is susceptible to can help you best understand the types of coverages you need. If your vacation home is along a lake, flood insurance is going to be a great option to explore. Beach homes will likely need to add windstorm insurance on top of their flood insurance as well. Headed somewhere away from the water? Around 25% of all flood claims come from homeowners that are outside of flood zones. Nevertheless, your home may still be vulnerable to other threats. Weather-related perils such as earth movement may require additional protection such as earthquake insurance to keep you safe.
- Vacation homes can often come with a variety of fun activities, but those activities can leave you in serious financial trouble without an umbrella insurance policy. ATVs, watercraft, fireplaces, pools, jacuzzis, and more can all be a great way to unwind, but insurance companies only see more risk. Should things go awry, you’ll want to protect yourself and your assets with an umbrella insurance policy. Please note that such policies may not be enough if you are renting your vacation home and a separate rental policy may be necessary to avoid coverage gaps.
- Your second home may not have everything you love but it will still have some valuables and they could be at more risk for theft due to the lack of traffic in the area. Personal property coverage is important and can help you restore losses involving theft and damage to property. It’s also important to remember that for secondary homes, coverage is limited, especially for items with higher values. Different insurance riders and options may be available. The best way to know your options is to speak with a qualified agent about your specific coverage needs.
- The aforementioned ATVs and watercraft are fun and will need their own protection as well. ATV insurance and boat insurance policies can help mitigate costs after a loss due to damage or injury. Personal property coverage is important for any homeowners policy, but it may not be enough due to its limitation on more valuable items to properly insure. Plus, bundling is a great way to save money while receiving more coverage!
Due to the vast possibilities when it comes to second homes, there isn’t a one-size-fits-all type of policy for homeowners. This is a benefit to homeowners because instead of underpaying for coverage that leaves you high and dry or overpaying for the protection you won’t use, you can get customized coverage that is built for your needs.
How Renting Affects Your Second Home’s Insurance Policy
Vacation homes can be a great source of secondary or primary income. With services such as Airbnb, renting your vacation home is easier than ever! But there are considerations to be had to stay protected. Here’s what you need to know about renting out your second home before you get started:
- Notify your insurance provider before doing so. This is important and failure to do so could have you stuck with a voided policy, unresolved claim, and a lot of damage to take care of on your own.
- How often you’re renting out your vacation home matters. If it’s a one-time deal then you may receive the same protections from your current homeowners insurance policy or may just need an endorsement to stay covered. If you are renting on a more recurring basis to different parties, your insurance company may consider this to be a rental business. Businesses require a business-specific policy to remain protected. On the other hand, homeowners who are renting to the same party for a longer period will likely need landlord insurance.
Your intentions, communication, and methods of renting will all have a role to play here. Renting your vacation home is a great way to make money on the side, but being prepared can help you avoid paying for damages and other perils out of pocket while doing so.
Ways to Save on Your Second Home Insurance Policy
Because of the increase in risks some second homes come with, saving money on home insurance is of utmost importance. There are plenty of ways to do so and an experienced insurance agent can help you find the right methods for you. Here are some of the most common ways homeowners keep their vacation homes insured without breaking the bank:
- Discounts- Not everyone will qualify for every discount but there are plenty to go around. You can find discounts for everything from installing a security system in your vacation home to being part of a professional or academic group and more!
- Communicating With Your Insurance Provider- It’s important because not only do you avoid having your insurance policy voided during a claim for failing to report conditions, but you can also save money. Letting your insurer know that your vacation home is a condo as opposed to a single-family home can lower your rate. We’ve explored the differences in renting. You may only need a short-term endorsement or nothing at all depending on your policy and provider.
- Bundling- Combining insurance policies provides the best potential for savings. Vacation homes provide plenty of opportunities. There are common policies such as auto insurance, ATV insurance, and boat insurance available for bundling. You can even beef up your liability protection by bundling umbrella insurance or add specific weather-related protection with coverage through flood insurance and earthquake insurance. It’s a great way to stay protected all while paying less.
Find the Right Protection for Your Second Home With TGS Insurance
It doesn’t matter if you are looking to forget your troubles at a beachfront bungalow along the Gulf Coast, unwind in Fredericksburg, enjoy a weekend getaway along Lake Travis, traverse the lands in Llano, or…well, you get it. TGS Insurance has your back no matter where you are looking to get away from it all!
We cover Texans and their second homes all across the Lone Star State and are proud to offer 35+ top-rated insurance providers who offer great protection for less. By comparison shopping your coverage needs, we craft you the best protection possible for the lowest price on the market.