If you own a second home as a vacation or rental property that stays uninhabited for extended periods, a standard homeowners insurance policy is insufficient for coverage.
Several insurers provide vacation home insurance and landlord insurance. There are some coverage and cost differences between primary and secondary home insurance, but both generally cover the structure of the home, personal property and liability.
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Primary home insurance vs. second home insurance
A key difference between primary and second home insurance is the scope of coverage each provides. A primary home insurance policy, also known as an HO-3 policy, covers "open perils." An open-peril policy covers any type of damage unless it's excluded in writing.
Second home insurance usually only provides coverage against "named perils." This means the policy only provides coverage against perils that are explicitly listed. If it's not written in the policy, it's not covered.
Do I need second home insurance?
There is no federal law requiring you to have homeowners insurance. However, if you finance your house, your lender will require you to have a policy. Generally speaking, a home insurance company will not cover two homes on one policy. You have to get a second home insurance policy for the other house. What kind of policy depends on a few different factors.
The first thing to look at is if the house is considered "unoccupied" or "vacant." An unoccupied home is one where the utilities are on and it can be moved into that day. A vacant home is one that needs some prep work before it can be moved into.
If you have a home that is uninhabited for a month or more, you'll need the appropriate type of home insurance policy for it. If your house is on the market to sell, or if it is a rental with no current tenants, then a vacant home insurance policy is appropriate. Both unoccupied and vacant home insurance policies are often available as individual policies or add-on endorsements.
When the home becomes inhabited, then you have other choices to make. In a vacation home you're living in, a second home insurance policy is appropriate. If it is a rental home that a tenant lives in, you'll want landlord insurance.
What does second home insurance cover?
Second home insurance coverage is similar to standard home insurance. It covers:
- The dwelling of the home
- Other structures, such as a garage
- Personal property
Second home insurance typically provides named-peril coverage, meaning that if a source of damage to your home isn't explicitly listed in your policy, it isn't covered.
If you are renting the home out, landlord insurance covers:
- Dwelling damage
- Personal property (not including tenant's belongings)
- Some external structures
- Loss of income
Insurance for rental properties comes in DP1, DP2 and DP3 types, each with different ways of providing coverage and costs. Talk with an insurance agent to find which one is best for your needs and budget.
Vacant home insurance coverage usually has more restrictions than a regular HO-3 policy. Fire and wind damage are often covered, but burst pipes and vandalism are not.
How much does insurance for a second home cost?
Whether you're buying a second home for seasonal getaways or to rent out, second homes have unique insurance risks. These include how isolated the house is, how often it's vacant and its distance from emergency services.
Because of these risks, owning a home that is not owner-occupied may have higher home insurance costs. All home insurance companies that provide second home insurance tend to have different price increases for second homes.
Similar to a standard home insurance policy, you may be able to save on your vacation home's insurance policy. If you have another insurance policy, such as auto insurance, you may qualify for a bundling discount when you purchase a second home insurance policy with the same insurer. You may also qualify for a discount if your vacation home has alarms or cameras.
The average annual landlord insurance premium can be 25% more than a standard home insurance policy. There may also be a price difference depending if you are renting long term or short term. Premiums for short-term rental insurance may be higher than for long-term rentals.
Vacant homes tend to be considered a higher insurance risk than unoccupied homes. With an unoccupied home, damage tends to be less, which means quicker claim resolution.
Insurance risks of a second home
Insuring a second home typically costs more because of the length of vacancy and possible severe weather trends in the area.
An empty house carries certain risks. If no one is living in the house, there's no one to act when a problem occurs. If a frozen pipe bursts during the winter and no one is on hand to notice it, you may be greeted by significant water damage when you finally get to the house.
If a fire starts in the house and no one knows until a car passing by calls emergency services, the home could be a total loss. Home insurers consider these risks when quoting your premium.
Chance of natural disaster
The chance of a natural disaster in your second home's area can increase the premium. If the vacation or rental home is on beachfront property or in an area prone to tornadoes, for instance, a higher premium is likely.
Areas with histories of natural disasters may require extra coverage not offered by home insurance. For example, if you take out a mortgage on a home in an area known for flooding, your mortgage company may require you to purchase flood insurance.
If your vacation home is near an area prone to earthquakes, we recommend purchasing earthquake insurance. Talk to your home insurance provider and make sure your second home has the proper coverage.
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