How to Insure Your Vacation Home

If you’ve bought a beachy cottage by the sea, a cozy cabin in the woods or a chic loft in your favorite city, make insuring your second home a number one priority.

You’ll need to select the right types of coverage, which may be more challenging and costly compared to insuring your primary home. “Some people think insuring a vacation home will be less costly, but it can actually be more costly because of the risks,” says Loretta Worters, a spokeswoman for the Insurance Information Institute (III), an organization dedicated to improving public understanding of insurance.

Covering Your Home Away From Home

There are two options for insuring your home away from home: a home insurance policy and a dwelling fire policy.

Which option you select depends on whether you and your family will be the exclusive residents of the home.

A Home Insurance Policy

If you and your family are the only residents of the house, a home insurance policy may be the better option for you. The policy on your vacation home will be separate from the policy on your primary home (although you can generally purchase both from the same insurer), and in fact, may actually be the more expensive.

According to Chris Hackett, senior director of personal lines policy for the Property Casualty Insurers Association of America (PCI), vacation homes tend to be more risky to insure than primary homes because they sometimes sit vacant. “With an empty house, the risks of burglary, fire and vandalism go up,” he says.

To help lower those risks, and possibly the cost of your policy, consider signing up for a central monitoring service, Hackett recommends.

A Dwelling Fire Policy

If you plan to rent out your vacation home, even if you plan to live there for part of the year, consider a dwelling fire policy instead. This type of policy will insure you against physical damage to your home and personal belongings.

If a crowd of rowdy renters throws a party that causes damage to your home, for example, and you have to cancel your next reservation so that repairs can be made, your policy will likely cover part of that lost rental income, says Bryant Goodreau, senior partner at Michigan Insurance Source, an independent insurance agency.

Keep in mind that a dwelling fire policy offers less comprehensive coverage than a homeowners insurance policy, so it won’t cover everything. For example, a dwelling fire policy won’t cover you against theft. This means that if a burglar steals your television, you won’t be able to file a claim to have it replaced. However, you may be able to purchase additional protection through add-ons to the policy, known as riders.

Other Considerations

1. Technically, you can purchase a dwelling fire policy even if you aren’t planning to rent out your vacation home. As mentioned, the coverage isn’t as broad compared to a homeowners policy, but it might be a good option if you don’t plan to keep much at your vacation home and don’t want to pay for more insurance coverage than you need.

2. Note that neither a homeowners insurance policy nor a dwelling fire policy will cover you for items stolen by a renter from areas to which the renter has access. Put simply, if you’re renting out your home and your renter steals from that home, you won’t be covered for that loss, regardless of the type of insurance you have.

3. If you own a condo, and not a house, you’ll need condominium insurance, whether you’re there exclusively or you rent the place out. But, if you do plan to rent out your condo, you’ll likely need to add an endorsement to your policy.

Extra Risks for Vacation Homes

But finding the right second home coverage isn’t always quick or easy. The very qualities that make a vacation home charming—the remote location in the woods, the view of the ocean, the tiled pool—can also make it more complicated to insure. Here are some added risks to consider when insuring a second home:

A Remote Location May Increase Fire Risk

The solitude of your vacation getaway could come at a price: higher insurance costs and difficulty finding an insurer, says Goodreau. That’s partly because, the more isolated the location, the harder it can be to quickly put out a fire.

Insurers will look at how far away the nearest fire station is and how difficult it would be for firefighters to access your home, says Hackett. “If you have a log cabin in the middle of a forest, a wildfire could definitely be a real risk there,” he says. It’s likely that such a large risk will be reflected in your coverage cost.

A Pool May Give Insurers Cold Feet

Liability can be a big issue with a vacation home, especially if you rent it out, says Goodreau. And the features that you love, like a pool or a nearby pond or even a trampoline, can increase that liability, says Goodreau. Renters or their guests might trip on the cobblestone walkway, be burned by the water in the hot tub or be injured in a grill explosion—and then sue you, he says.

So, if you rent or are planning to rent your vacation home, Goodreau recommends that you carry at least $1 million in liability coverage, which may cost you only $50 or $60 more per year than half that amount of coverage.” You get a lot of bang for your buck.”

You May Need a Flood Insurance Policy

Just as with a primary home, you’ll need a flood insurance policy if your second home is in a flood zone. You can visit fema.gov to check flood maps and cost estimates.

Take the time to consider your insurance needs, shop for the right policy and budget for the expense. Once you’ve found the right coverage, you can relax, put your feet up and thoroughly enjoy your vacation home.