Dream vacation homes come with very real insurance concerns

Justin Stoltzfus

A vacation home can help you use your savings to enjoy getaways in an exotic place without the cost of rented lodgings. But while shopping for your summer cottage or vacation villa, keep in mind that it may have special insurance needs.

Vacation home sales rose nearly 8 percent in 2009, with nine out of 10 buyers planning to use their vacation homes as family retreats rather than rental investments, according to the National Association of Realtors. Such lifestyle choices create unique insurance concerns, especially if these properties are occupied only part of the year.

Most home insurance providers will drop conventional coverage for a building that has been unoccupied for more than 30 days, according to the Insurance Information Institute, because insuring a vacant building has added risks, like theft or vandalism. There's also a higher risk of water damage and other kinds of natural decay because vacant buildings are monitored less than occupied ones.

The Insurance Information Institute suggests getting a "vacancy permit," which can get you continued insurance from your provider in exchange for reduced coverage for theft. Some specialty companies also offer what's called vacant home insurance. But you should expect to pay much higher premiums for it.

Liberty Mutual urges consumers to keep the local climate of their secondary homes in mind -- it may be very different from what you're used to back home. For example, if your secondary home is near the coast or in a flood plain, you'll likely need flood insurance which is not covered by standard home insurance policies) from the National Flood Insurance Program. Other catastrophes to watch out for are earthquakes and landslides.

The National Association of Insurance Commissioners has a few other recommendations for vacation home owners:

  • Understand the "named perils" the specific things a policy covers) in the policy for your secondary home. If you're spending only part of the year in a vacation home, do not assume that its policy will automatically cover the same things that the policy for your primary home covers.
  • Evaluate coverage necessities for all outbuildings, additions like fences and attractive nuisances outdoor amenities, like pools, that could lure trespassers and lead to injuries on an unoccupied property).

Consider general liability coverage for any vacation home if you're renting it or letting friends and family stay there.

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