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Thinking about buying a vacation home? Don't forget insurance costs

April 8, 2016
Vacation homes are at greater risk of damage and theft, which can make insuring them more expensive.

You have finally found the perfect vacation home, and you can't wait to put in an offer and start relaxing. Before you take that plunge, though, don't forget to factor in the cost of home insurance. Sometimes, home insurance on a vacation home can actually be more expensive than the insurance on your primary place of residence. Before making any final purchase decisions, it is important to speak with your insurance company to determine what those costs will be.

Why vacation home insurance can be costly

According to the Insurance Information Institute, there are a few reasons vacation home insurance tends to be more expensive:

  1. Vacation homes are often located in areas that are rural or densely wooded, making them more prone to weather damage from wildfires. Other vacation homes along shorelines are likewise at risk of floods or hurricane damage.
  2. Common vacation home luxuries, like swimming pools, are often high risk and require larger premiums.
  3. These homes are often empty for large portions of the year, which means they are more likely to be vandalized or robbed.
  4. Vacation homes are more susceptible to long-term damage because it might take a while before a homeowner discovers something wrong with the property.
  5. Because standard home insurance does not cover flood damage, owners of vacation homes in areas considered “flood zones" are required to obtain flood insurance, which is an extra cost.

"Water damage can be a bigger problem in vacation homes.”

Special considerations to make for vacation home insurance

The National Association of Insurance Commissioners said water damage can be a bigger problem in vacation homes because an issue can persist for a long time before anyone notices. As a result, sewer back-up coverage might be a good idea. In addition, secondary home insurance does not necessarily provide full coverage for buildings that are not connected to the home, such as a garage or a boathouse, so make sure to determine whether you will need to add more coverage to protect these assets.

Another question to ask yourself:  Do you plan to use your vacation home as a rental property? If so, you will probably need more coverage to protect yourself if anyone gets injured while spending time in your home as well as to cover yourself in the event a renter damages your property.

According to Bankrate, an unfurnished home might not qualify for a standard home insurance policy, so if you don't plan to fill your home with furniture, speak with your insurance company to determine the kind of coverage you will need. In addition, any time you make a renovation to the home or add an expensive item, you might need to update your policy. Even the addition of items not kept inside the home, like boats, may require a policy update.

To make your secondary home insurance as cheap as possible, III suggested bundling the policy with your current one. In addition, you may be able to lower your premium if you implement a fire- and theft-detecting alarm system.

Your vacation home should be a dream come true. You don't want to find yourself stressed with unexpected financial obligations when your goal is to relax and get away from it all. Keep these costs in mind from the start, and you won't find yourself worrying later on.