The policy you purchase for the home you live in will differ from any policy you purchase for a second home. Whether it’s a rental property or a private vacation home, there are some important factors to consider and discuss with your agent.
The Insurance Definition of a Vacant Home
A vacant home, according to most policy forms, is one that has been vacant for 30 days or more. From there, the definition is somewhat grey, depending on your actual situation. If, for example, you have a house full of furniture because you’re on an extended vacation, your policy may not consider your home vacant; or may only consider your home vacant in terms of a vandalism claim. If you attempt to leave a desk and a chair in a building to make it look occupied even though it is not, your insurance company will likely still consider the home vacant.
The Problem with Vacant Homes
One of the biggest problems insurance companies have with second homes is the fact that they’re vacant for a great portion of the year. Statistically speaking, vacant homes run a greater risk of becoming a target for theft and vandalism. Because of this, insurance companies are not as willing to provide insurance under the traditional HO-3 homeowners form, instead opting to create special coverage forms to address the special needs of a vacant home.
You can, of course, reduce some of the risk (and your premium), by installing an alarm system or purchasing a home that’s located in a gated community.
Alternative Coverage for Vacant Homes
The most basic coverage you can purchase for a second or vacation home is dwelling coverage, usually written on the DP-3 or DP-1 form. These policies, especially the DP-1, can be limited in the types of damages they’ll cover, but offer you protection for the building itself and for your personal liability needs (ie. someone slipping on ice on your property, whether you’re there or not).
The type of property eligible for each varies. Homes that are within 80 years of age, have an updated roof, and are in generally good condition may qualify for a DP-3, which offers broader coverage. Your old cabin in the woods would qualify for DP-1 coverage, which is more limited.
If, for example, you are renting your second home, you would need DP-3 coverage to protect the building itself. Your home would no longer be considered vacant, so your insurance company is likely to offer you a lower premium base; though they will definitely check to see if the home is occupied. Your tenant would then be responsible for purchasing renters insurance to cover his own personal property and liability needs.
You’re going to pay a significant premium – more than you would on your regular homeowners policy – for a second or vacation home. There are now several companies writing specialty policies for seasonal/vacation homes, vacant homes, and even rental properties. Talk to your insurance professional to determine which program will offer you the appropriate coverage at the most cost effective price.