Owning a second home is a goal for many Americans. Whether it's a vacation home or a rental property, many find that a second home is a good investment. Around 6% of households in the US own a second home and that number continues to grow. While second homes can be a great investment and generate income, there are also plenty of costs involved. One potential cost is homeowners insurance. Here are three things that homeowners should keep in mind when insuring their second home.
Rental Versus Residence
When it comes to homeowner's insurance, there is no one size fits all. The insurance needed for a second home will differ depending on whether or not the home is rented out. What many owners of second homes find out when they rent out their property is that regular homeowners insurance does not offer sufficient coverage for long term renters. Landlord insurance may be the better choice in this instance. Landlord insurance will cover things like damage to the home, the owner's possessions within the home, and even lost rental income. Landlord insurance costs 15% to 20% more than traditional homeowners insurance but it often offers superior coverage.
Short Term Rentals
Many people choose to rent out their second homes only once or twice per year. In these instances, homeowners insurance will often provide coverage. However, additional insurance may be needed for those who rent out their second home often for short stays. Many companies that help set up these short term rentals offer their own liability coverage while others do not. For those who regularly rent out their homes for short periods of time, a business policy is often needed in order to be adequately covered.
Vacation homes are an interesting situation when it comes to insurance. Sometimes they are rented out in order to help offset their cost. Other times their owners only use them for part of the year. A separate homeowners policy will be needed. Homeowners should consider using the same company to insure their second home as they do their first home since that can lead to a discount of up to 5% to 10%. Since many vacation homes are on the beach, insurance for hurricanes is also a necessity. Flooding insurance is something that is necessary and varies depending on location. A $100,000 flood insurance policy usually costs around $400 per year.
Second homes are something that many consider investing in. However, insurance can be tricky. Second properties that are rented out may require landlord insurance. Short term rentals may be covered under basic insurance or a separate business policy may be required. Owners of vacation homes should also consider additional coverage for weather.Share