Purchasing a second home is often an exciting venture for successful individuals and their families. Oftentimes a second home means family memories in a warmer climate or even a convenient second location due to work commitments. Before making that purchase, it is important to determine insurability and correctly estimate the ongoing cost of ownership.
Here are 5 key considerations when looking to purchase and insure a second home.
Location
Geographic location has great bearing on premium outlay. Is your second home on the coast, in the mountains or in a rural area? Expect your insurance premiums to be higher due to historical weather patterns or the luxurious zip code associated with your home.
Usage / Occupancy
Will your second home be owner occupied, vacant, rent-to-others or rented short-term through sites like VRBO and Airbnb? The usage can determine which markets are available and potentially inflate premiums due to various risks. To mitigate your risks, obtain tenant-occupied dwelling insurance. This insurance will cover the costs incurred by damage, storms, theft, fire and even vandalism.
Are you expecting to have to repair big-ticket items like the roof regularly because of weather conditions?
Construction
The construction of your property can also incur higher premiums, specifically in coastal or mountainous areas. Is your house made of brick, stone, wood, aluminum siding? Do you have a log cabin in a mountain area? Construction type is a key factor in the premium for your second home.
Other Structures
Pools, detached garages or structures, piers and seawalls are also considerations when purchasing a second home. Do these currently exist or are you planning to build one in the near future? If other structures exist, obtain dwelling fire or hazard coverages in case of fires, floods, etc.
Personal Property
What furniture, personal property or recreational vehicles will be in your second home or stored onsite?
- Furnished or Unfurnished – In the second home, customize your limit of coverage to the level of items occupying your space. Not many second homeowners furnish their properties to the extent of their primary residence.
- Specialized Personal Property – Will there be fine art, wine collections, etc.? There are specialized coverages for these items.
- Additional Recreational Vehicles – ATV’s, boats, snowmobiles, collector cars, golf carts, etc. can all be insured outside of the home product.
In the event of peril discrepancies, these items can be covered through a floater or policy endorsement.
If you have additional questions or want a comparison chart detailing the differences between standard and premium insurance markets, click here.
Article written for Luxatic by Anthony Roman, Vice President and Practice Leader for Assurance’s Private Insurance Management division.
