Owning a vacation residence makes it easy to recharge away from home. Even better? You could earn additional income if you rent it out long- or short-term. Either way, purchasing home insurance for your second property protects your investment by making sure it’s covered against damage.
However, the home insurance you have on your primary residence usually doesn’t include other locations, so you’ll need a separate homeowners policy for a second or seasonal home. Here’s how second home insurance works and what to consider when purchasing a policy.
How does second home insurance work?
Second home insurance is a homeowners insurance policy that covers a secondary residence you own in addition to your primary home. It works similarly to a standard homeowners insurance policy, covering your second home’s structure, its contents, and in some situations, your personal liability associated with it.
Secondary home insurance policies can have coverage limitations. For instance, an insurance company may only protect your dwelling structure or refuse to extend coverage to a property that’s located more than two miles from the nearest fire station.
Moreover, coverage for certain perils – like water damage or acts of vandalism – may be limited or totally excluded. This often depends on the type of secondary home insurance you get, how much time you spend in the home, and whether you rent it out or not.
How does second home insurance differ from primary home insurance?
Insurance for a vacation, second, or seasonal home tends to be more expensive and less comprehensive than primary homeowners insurance. This is because second homes are often vacant for long periods of time and located in natural disaster-prone areas, like close to the beach, high in the mountains, or far from a fire station or emergency services.
The result? Many insurance companies see them as riskier – and therefore more costly – to insure.
For example, most home insurance policies already limit coverage for perils like theft, vandalism, broken glass, and interior water damage if a home is left vacant for a certain length of time – usually 30 or 60 days. Second homes are often empty for at least that long, or even longer, so insurance companies may choose to adjust their policies to cover the additional risk. The extra risk associated with the home usually means you pay more for your policy.
Another big difference is that second home insurance is typically written on one of three dwelling fire policy forms (as opposed to the HO-3 policy most primary homes are protected by). This means your coverage options are typically limited to a DP1, DP2, or DP3 policy.
Dwelling fire policies often have little to no personal liability coverage or medical payments coverage, but some insurers may allow you to add it. That’s not always the case, so check with your insurance company or agent before you buy a policy.
What does second home insurance cover?
Second home insurance works similarly to a primary homeowners policy in that it covers:
-
The property’s main structure or dwelling (Coverage A).
-
Additional structures on your property, like a detached garage or fence (Coverage B).
-
Your belongings (Coverage C).
-
Loss of use if you have to pay for temporary housing expenses while your house is rebuilt (Coverage D).
A couple of notes about what’s the norm in these coverages. First, Coverage D also provides fair rental value coverage if you lose rental income when your home is temporarily uninhabitable. However, coverage for your personal property (Coverage C) is usually very limited.
What does second home insurance not cover?
When second home insurance policies are written as DP1 insurance, they cover your risks on a named perils basis. This means your insurance only covers damage to your property that’s caused by one of the perils identified in the policy.
DP1 policies usually only cover damage caused by these nine perils:
-
Fire and lightning
-
Internal and external explosions
-
Windstorm
-
Hail
-
Riots
-
Smoke
-
Aircrafts
-
Vehicles
-
Volcanic explosions
DP2 policies are also named perils coverage, but they cover a few more perils. DP3 insurance is written on an open perils basis, so it provides the broadest coverage. However, the extent to which any of the dwelling fire policies cover liability claims depends on your particular policy.
Do I need insurance on a second home?
You usually need insurance on a second home because your primary homeowners insurance policy doesn’t cover a second property – even though the personal liability coverage on your primary policy may extend to your second home, depending on your circumstances and your policy’s coverage and limitations. Additionally, if you’re financing your second home, your lender may require you to purchase coverage.
But let’s say you’ve paid off your property. It may still be in your best interest to insure it. Secondary homes tend to face higher risk for damage caused by natural disasters, break-ins, or undetected deterioration as they’re not occupied permanently, like a primary residence is. If you choose not to insure it, then you’re on the hook for these situations.
Do I need different insurance if I rent my vacation home out?
Renting out your vacation home does require another kind of insurance policy, but what that is depends on your insurer. Some insurers may require you to add short-term rental coverage to your policy or increase your premiums if you won’t be in the house while it’s rented.
If you’re planning to rent your vacation home for longer periods of time or permanently, your best choice may be landlord insurance. This type of policy protects your rental income if there’s a loss, excludes your tenant’s personal property from coverage, and offers protection against increased risks caused by having tenants.
How much does second home insurance cost?
The cost of a second home insurance policy depends on multiple factors, including the type of property, where it’s located, how long it’s vacant during the year, and any special features it has.
Factors that impact second home insurance premium
-
Type of property. If it’s an old house that hasn’t been upgraded or maintained, it might be considered a higher insurance risk. On the other hand, if your second home is a condo, your insurance cost may be lower as the condo association may maintain the common property and provide security.
-
Location. What makes your second home a vacation haven may also make it pricier to insure. For example, if it’s located near the beach, the risk of damage from a hurricane is high. If it’s in the mountains, it may be more prone to wildfires.
-
Occupancy. Vacation homes are often vacant for longer periods of time, which increases the chances of burglary or undetected damage. If you rent out the property, it may need increased liability protection and be at risk for damage caused by tenants.
-
Amenities. If your second home has a pool, a hot tub, or other amenities, these may not only offer fun and relaxation, but also increase your insurance premiums. They also may require you to have additional liability protection, which can increase your coverage costs.
Additionally, you may have to buy supplemental insurance riders or an additional policy to get certain perils covered, like floods or earthquakes.
Second home insurance coverage limits and deductibles
Your vacation home’s replacement cost has the biggest impact on your coverage amounts, and ultimately, your premium. Most insurers want you to insure your home for its full replacement cost so you’re able to recover from a total loss.
Likewise, depending on the location of your second home, your policy may also have specific disaster deductibles in addition to your standard deductible, like a:
-
Hurricane deductible. Hurricane deductibles usually apply to any damage caused by high winds and heavy rains from a hurricane. They can be a flat amount, but it’s often a percentage of your dwelling limits.
-
Wind/hail deductible. Wind/hail deductibles apply if heavy winds, rain, or hail damage your home. They can also be either a percentage or a flat-rate deductible.
Other deductibles may apply depending on the location and type of your property. Working directly with an agent can help you get a clear sense of the coverage limits and deductibles that apply to your second home’s specific situation.
How to lower second home insurance cost
These steps can help you get a more affordable policy.
-
Pick a less risky location or property. A condo located farther from a waterfront or flood-prone area may be cheaper to insure than a single-family house right by the beach or miles away from the closest town.
-
Bundle policies. While you’ll need a separate insurance policy to protect a seasonal home, purchasing coverage with the same insurer that covers your primary residence may yield a discount.
-
Install an alarm system and smart home sensors. A centrally monitored alarm system that detects break-ins and fires, as well as smart devices that detect water leakage or excessive humidity can help you reduce your premiums.
-
Shop around. Get multiple quotes from different insurers before purchasing your policy – and make sure to review your policy every year if you think you can get a better deal.
Challenges of insuring a second home
The location of your home may be one of the main challenges to find an affordable insurance policy. Some insurers may refuse to cover a property that’s located in a remote area with restricted access to emergency services. Shopping around with multiple insurance companies can help you find the policy that best meets your needs.
How to get second home insurance
These steps can help you get your second home insured.
-
Determine how much coverage you need. You’ll need to estimate the cost of rebuilding your second home from the ground up. You’ll also need to have a sense of the value of personal property you have in that property and whether you want to add liability coverage you need.
-
Consider additional coverage based on where the home is and how you use it. If your property is located near a body of water you may need flood insurance – most standard homeowners insurance policies don’t include it. And if you’re planning to rent your vacation home, you may also need to consider landlord insurance.
-
Gather your property’s information. Similar to your primary residence, you’ll need to know information like square footage and renovation history. You may also need a home inspection and a security certificate if you want to get a smart home security discount.
-
Consider bundling your primary home and your second home insurance. Working with the same insurance company might give you access to a discount.
-
Ask for additional discounts that may apply based on your property’s features, like a hip-shaped roof or wind mitigation features.
-
Learn about hurricane deductibles, especially if your second home is located in an area prone to this type of natural disaster.