Guide to Vacation Home Insurance

A vacation home isn’t just a good investment for the snow birder or lakeside aficionado — it provides a respite from weekday life, not forgetting its tremendous appeal. But just as your primary home has upkeep, costs, and liability concerns, the same goes for your vacation home.

Second homes can be an insurance risk since you don’t physically occupy it as frequently to catch issues with the property, not forgetting that an empty premise runs a higher risk of theft and vandalism. But does the insurance policy on your primary home extend to your second or rental homes? Or do you need separate vacation rental insurance? Let’s get you in the know about vacation home insurance. .

What is Vacation Home Insurance?

Vacation property insurance covers property that isn’t your primary residence. In Canada, cottages are the most popular vacation homes — but a ski chalet may also qualify. If you own a second home, you’ll need to insure it. But since the risks are different, your coverage may cost more than your primary homeowners policy.

However, vacation property insurance and primary home insurance share some characteristics. Typical policies offer the following coverage:

• Property and its contents. This policy covers you if your property or its contents are lost, damaged, or destroyed by an insured risk. Commonly insured risks include fire, theft, vandalism, flood damage, among other risks.
• Liability coverage. Liability coverage protects you if you’re held responsible for any injury or damage to someone else or their property. For instance, if a guest at your cottage slips and falls, your policy will pay for the medical and legal costs, up to a specific limit.

Do I Need a Separate Home Insurance Policy for My Vacation Home?

You’ll most likely need to obtain a separate home insurance policy for your vacation home if you want to fully protect its structure and the contents inside. And if you carry a mortgage on your vacation home, your lender may mandate that you insure it.

In some instances, insurance carriers may extend the liability coverage portion of your current homeowners’ policy to a vacation property. This means that if someone’s injured at your second home, your primary home’s policy will help cover the resulting legal expenses or medical bills.

Other reasons why you need a separate home insurance policy for your cabin, beach cottage or lake house include:

• Vacation homes are deemed riskier. It shouldn’t come as a surprise that vacation property insurance differs from your primary home’s policy in terms of coverage or cost. Features that make your vacation home more appealing could be the source of additional risks. For instance, a beach front cottage could have a higher flood risk. Such sought-after perks can make a property more expensive or entirely difficult to insure.
• Coverage may be more limited. Insurance for vacation homes isn’t written the same as insurance for your primary residence. In most cases, insurance providers will write second home insurance on a “named perils” basis since you don’t occupy it as your full-time residence. You may not also keep your valuable contents there all year round.

A named perils insurance policy only covers events that are specified in the fine print, so you’ll have to pay for any damage or losses due to a non-listed peril. On the other hand, a standard homeowners insurance policy may have a broader coverage spectrum than what you actually need for your second home.

What Does Vacation Home Insurance Cover?

Although vacation home insurance isn’t entirely identical to a traditional homeowners policy, it may cover many of the same things your homeowners insurance does while offering additional protection. Insurance companies typically build quotes around named perils — a policy will list a set of events that are covered, including damage from lightning, theft, fire, explosions, a natural disaster, and more.

Your vacation home insurance policy may also include liability coverage to cover any injuries sustained by someone who’s on your property. This policy may also include medical payments coverage.

Vacation home insurance policy may also include personal property coverage to protect your belongings, including clothing, furniture, and appliances. You may customize this coverage to ensure all your belongings are protected. Vacation home insurance may also cover loss of rental income if you’re renting out your cottage.

It’s possible that if you already carry homeowners insurance for your primary home, your insurance provider may extend its coverage to your vacation home.

How Much Does Vacation Home Insurance Cost?

According to American Family Insurance, vacation home insurance costs may range anywhere from 2-3 times the cost of a comparable homeowners’ policy — which may add up to $2,000 – $3,000 annually. The higher cost of insurance is attributed to the special risks presented by vacation homes. Keep in mind that insurance premiums may differ depending on a combination of factors like:

• Location. The location will always weigh in on your homeowner’s insurance costs — you’ll pay a higher premium if your second home is located in an earthquake or flood-prone area. Remember, the location that makes your vacation home more appealing may add to the insurance costs. For instance, a beach front cottage might be more exposed to storm surges from hurricanes. Location-based risks will weigh in on your policy costs, and in some instances incur higher deductibles.
• Amenities. Amenities like hot tubs and pools add risks to your vacation home, just as much as they do to your comfort. You can expect to pay a higher premium if your vacation residence is equipped with such special amenities. More amenities also require additional liability protection — which increases your insurance costs as well.
• Type of property. As is common with most homes, the age and type of building materials will impact your insurance costs. Another important aspect is whether your vacation home is a condominium, single-occupancy house, or a townhouse. For instance, the cost of insuring a condo in a ski resort area may be lower than that of a stand-alone cabin since a homeowners association typically maintains the condominium.
• Luxe items. The expensive jewelry, art, and collectibles you’re so much in love with will add to your vacation home insurance needs — for obvious replacement cost reasons. In some instances, a separate insurance policy may be more cost-effective and comprehensive.
• Renting it out. You’ll most likely need additional coverage if you’re going to offer your vacation home as a rental to an occupying tenant.

You can make vacation home insurance more affordable by bundling your policies, installing a security system, and shopping for discounts.

Frequently Asked Questions

What is considered a vacation rental property?

A vacation rental property is a home you’ve decided to offer up for short-term rentals through specific home-sharing programs and platforms like Airbnb, TripAdvisor, and HomeAway. In this case, your second home insurance policy may not extend coverage to damage that occurs while you’re renting out the property. Some insurance carriers may require you to obtain an entirely separate policy when you rent out your vacation property. Here are a few scenarios you should consider to understand your insurance options:

• If you intend to rent out your property one time (say a short-term vacation), your insurance provider may extend the protection from your existing homeowners insurance policy to the home while it’s rented out. Other carriers may require you to obtain an endorsement to the existing policy in order to extend coverage. Short-term rental insurance is an option you may consider.
• If you intend to rent out the home multiple times a year, some insurance companies may consider it a business activity. You may need a business insurance policy to protect your home.
• If you plan to lease your home for an extended period, you may need to obtain a landlord policy.

Why is vacation rental property insurance more expensive than homeowners insurance?

Vacation rental property insurance is often more expensive than homeowners insurance because the second home typically sits vacant more frequently, putting it at a higher risk for vandalism, theft, and undetected damage like leaking water pipes.

Renting your secondary home involves additional, more complex risks, so be sure to speak with your insurance representative to better understand the proper insurance coverage options.

Does Airbnb provide vacation rental insurance?

From check-in to checkout, Airbnb may protect you through two options:

• Host Protection Insurance provides up to $1,000,000 in primary liability insurance coverage for your legal responsibility to a guest that gets hurt or has their property damaged. It usually applies first regardless of other insurance policies you may carry.
• Airbnb’s Host Guarantee offers $1,000,000 in property damage protection if your home or belongings are damaged by a guest during their Airbnb stay — but it won’t cover all property damage.

Coverage from your homeowners or condo insurance policy may be limited while you’re hosting an Airbnb guest — or entirely none at all.