Whether you purchase a second home as a rental property or strictly for your own use, protecting it from risk takes a different approach than insuring a primary home. At a minimum, the fact that you don’t occupy the home full time leaves you exposed to certain risks you might not think about.
By understanding what insuring a second home involves, you can work with an independent insurance advisor to obtain the right coverage and reduce your risk.
Think About How You Plan to Use the Home
How you intend to use the property—as a second home vs. a rental property—will affect the specific risks you’ll face and the type of coverage you’ll need.
If you plan to use it as a vacation home, you’ll need similar coverage as you have on your primary home, but the underwriter will rate the property differently since it will be vacant at times. If plan to rent out your second home, it’s likely you won’t be able to get the same broad coverage you have on your primary home. Many carriers restrict coverage on a rental home to compensate for the higher exposure to damage and charge rates that average 20-25% more than a standard homeowner’s policy.
These 5 Risks Top the List
For most owners of secondary homes—especially high-value homes with unique features—the following are the leading risks to protect against.
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Water Damage
Water damage is the second most common home insurance claim, and homes left vacant for a large portion of the year are at greater risk. For instance, if a pipe bursts in a home you only use occasionally, it could go unnoticed for weeks or months, causing more severe damage than if you lived there full time and discovered it immediately.
That’s why many carriers require leak detection systems (ideally with automatic shutoff features) for secondary homes, which often qualify for a premium credit. If the device detects that the water pressure has exceeded a pre-determined threshold, it notifies you and activates the shutoff feature. These systems can prevent a $10,000 claim from turning into $300,000 worth of damage requiring mold remediation.
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Burglary
Thieves are known to target homes that aren’t occupied full time, especially high-value properties where they’re likely to find expensive valuables. Many carriers require secondary homes above a certain property value to have a security alarm with a central monitoring service, which can deter a burglary attempt or scare away an intruder. If you buy a secondary home that doesn’t have an alarm system, plan to add one soon after you close on the sale
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Flood, Wind, and Hail
Depending on the location, your secondary home may be more susceptible to flood, wind, and hail than your primary home. Yet, standard homeowner’s policies nearly always exclude flood; in some regions, they also exclude wind and hail or limit the coverage. Even if your lender doesn’t require flood insurance, or you don’t carry a mortgage, it’s always advisable to purchase flood coverage—not just on a secondary home in a coastal area, but on any home in any location. A separate wind and hail policy is also recommended in coastal areas. These policies can be costly, so plan for the added expense when buying a second home.
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Damage by Renters
Few renters will care for your home like you do, so damage is always a risk.
If you rent to a long-term tenant, your lease should require them to purchase renter’s insurance that transfers the damage liability away from you. If you don’t, and the renter causes damage, your homeowner’s carrier is unlikely to cover the claim. It’s also helpful to hire a property management company to conduct background checks on renters and inspect the property periodically, especially if you live too far to inspect it yourself. For lavish properties with a secondary building, some owners hire a live-in caretaker for greater peace of mind.
If you rent your home for short vacation stays, the risk of damage is often greater since there are new people in the home continually and frequent turnover makes it difficult to pinpoint who caused the damage. To protect yourself, keep these considerations in mind:
- Not all insurance carriers will provide coverage for homes used as short-term rentals; others will write the policy but charge a higher premium. Be sure the carrier knows how you intend to use the home.
- Sites like Airbnb and VRBO offer damage coverage to close gaps in your insurance. It’s best to add this supplemental insurance to protect against damage by renters.
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Personal Liability
Many secondary homes have features that raise your personal liability risk, such as a pool. If a renter is injured in the pool or elsewhere on your property, and you don’t have the proper coverage, a liability lawsuit could wipe out your assets.
Sufficient umbrella liability coverage is essential for anyone with significant assets, but especially owners of secondary homes—particularly if you rent the property and/or have a pool. How much coverage you need is a complex question, but it’s generally driven by the total value of your assets, including homes and investments. Most carriers also require the pool to be fenced in (which is often required by local township codes).
Looking Beyond Insurance for Second Homes
Proper insurance for a secondary home is essential, but it’s just one part of the equation. Simple measures like these can reduce the risks associated with a second home:
- Install a backup generator, especially in areas prone to power outages and in northern states where extended cold spells can cause pipes to freeze.
- Add a condensate overflow switch on your indoor HVAC units to avoid a water leak, especially for units on the second floor.
- Replace plastic fittings around indoor water supply lines with metal fittings that are less susceptible to cracking.
- Divert water away from the home by re-grading the lawn, adjusting downspouts, installing a rain barrel, or using pea gravel instead of mulch.
Turn to B. F. Saul Insurance to Help Protect Your Second Home
Given the volatility of the property insurance market—with major carriers no longer writing new policies in Florida and California—it’s critical to work with an independent insurance advisor that will monitor evolving conditions and obtain the best coverage. That’s why many owners of secondary homes trust B. F. Saul insurance.
Our personal insurance specialists are well-versed in the unique exposures of secondary homes and the best ways to protect against the most likely risks. Even if you’re in the early stages of exploring a second home, contact us to get an initial idea of coverage availability and rates.
