L&T Blog

What You Need to Know About Insuring a Second Home

June 26, 2019

Buying a house is often one of the biggest investments people make during their lives. But what about purchasing a second home? Now that’s an investment. For some of us, a second home might be a quiet lakeside escape from the noise of the city. For others, it’s just down the street ­from your first house and rented out – resulting in valuable additional income.

There are many variables to consider when purchasing a second home. The first is determining where your second house should be located, but this is followed by a long laundry list of other practical aspects to cover. Near the top of that list is finding the most appropriate insurance and fulfilling the carrier’s requirements.

Determine What Type of Home Insurance is Appropriate

The type of insurance you need depends on how you plan to use the property. Will you be living at this location for at least part of the year? Or will you be renting it out?

·        You’re planning on living there. If the home is an owner-occupied secondary residence and it’s only rented out on occasion, some insurance carriers will offer the same type of coverage provided on a primary home policy.

·        You’re planning on renting it out. If you’re renting out the house for six to 12 months out of the year, it becomes a tenant-occupied location rather than a second home. The policy needs to be written accordingly. Some will require it to be written on the dwelling fire form, and coverage isn’t usually as broad as that of a primary home policy.

Insurance carriers may have underwriting requirements, such as supporting business to meet eligibility. Also, HOAs might have their own guidelines for minimum standards. A key tip: carriers are often more willing to provide coverage if your property is a more desirable risk. This can also reduce the severity of any loss that may occur.

Furthermore, if your second home is listed on vacation rental sites like AirBnb or VRBO, note that it represents a different type of exposure that is generally not covered by traditional homeowner or tenant policies.

Prepare for Natural Disasters Sooner Rather than Later

Your second home might get shade from tall pine trees, or maybe a nearby river provides a soothing soundtrack. Of course, these locations – surrounded by national forest or on the banks of a winding river ­–are highly desirable, but they might be prone to natural disasters like fires or floods. Take steps to reduce the likelihood of a loss. In areas at risk for wildfires, mitigation efforts such as brush clearance to create a defensible space, trimming tree limbs and regularly cleaning the gutters are becoming standard requests.

If your insurance agent recommends or requires certain steps to reduce the severity of a claim, don’t wait to take action.

Protect Your Property for When You’re Not Present

It’s common for homeowners to be away from their second home, especially if it’s only used for vacation. In these cases, many carriers ask for risk management compliance. These requests not only reduce the likelihood of a loss, but they can give homeowners peace-of-mind when they’re not on location.

Common risk management compliance requests include:

·        A monitored fire or burglar alarm

·        A property manager or neighbor to check on the property frequently

·        A leak detection system that automatically shuts off the master plumb valve when a leak is discovered

It might come as a surprise to some, but water is by and large the most common cause of loss. Anything a homeowner can do to prevent a water leak is beneficial.

There are a couple proven (and affordable) safeguards against a water-related loss:  

·        Get an annual checkup on your HVAC system, hot water heater and other appliances

·        Replace rubber washing machine and refrigerator hoses with steel-braided hoses ­– they’re inexpensive and easy to install

A second home offers several benefits. Many of us daydream of having our own peaceful getaway. Some of us could use the additional income from tenants to pay off debt, boost savings or reinvest in a business. But second home ownership requires the right mindset and a willingness to take on additional responsibilities. The first step a homeowner needs to take – before ­diving into décor and summer plans – is finding the appropriate insurance so their new property is protected (and enjoyed) for years to come.