Things to Consider Before Buying a Vacation Home
You went on vacation and fell in love with the location. Now you think you will want to visit several times a year, and maybe even retire there. It might be tempting to go ahead and buy a vacation home now, then move there permanently when you retire. Before you leap in to vacation home ownership, consider these questions: Will you visit several times a year and keep it vacant the rest of the year? Will you rent it out to other vacationers when you aren't there to help offset the cost of ownership? Or will you live in it several months of the year and keep it vacant the other months? All of these are factors in the type of insurance you'll need for it.
When a house, condo or townhome is vacant for a long period of time, the risks might be the same, but if nobody is there to report a problem or do anything about it, the damage could be worse by the time it's discovered. For example, Gary and Val are snowbirds. They live in the Midwest for six months of the year and live in a condo in Florida six months of the year. One year while they were in their Midwest home, a pipe burst in the fire sprinkler system of their vacation home. They didn't know until they returned in November, and by that time, mold had started to grow on the drywall, and the baseboards had started to rot. Making matters worse, since their vacation home was a condo, the mold started to spread to other units. If they had been there when it happened, they could have turned off the water when the pipe burst and dried everything immediately, significantly reducing the amount of money it took to fix the problem. A situations like this is one example of why it's risky to leave a house vacant for a long period of time, and why you need additional coverage if it is. It’s also why it might not be a bad idea to rent your vacation home out when you are not using it. Many people choose to do this anyway to help with the cost of owning a vacation home, but having someone there—and someone who goes in and cleans after each guest leaves—increases the likelihood that you will know about problems when they occur and get them fixed to avoid further damage.
If you plan to rent the home out to other vacationers when you're not there, you'll need additional liability coverage. This is especially important if the house you're renting out has a pool or hot tub. The type of coverage you'll need depends on the length of your rental terms, too. If you rent to other vacationers, you may need to look into a business policy. If you're renting it to the same person for six months to a year, you may need a landlord policy.
House or Condo?
The type of property you buy as your vacation home will dictate what type of coverage you need as well. For instance, a condo will cost less to insure than a house. According to the Insurance Information Institute, the cost of insuring the structure of the condominium unit will generally be included in the monthly maintenance fees, while your personal condo insurance will help cover your belongings and specific areas of the unit listed in the policy.
Location, Location, Location
Another factor to consider is the location of your vacation home. Favorite vacation home spots are often near the ocean or in the mountains—and each of those places carry specific regional risks that may require additional insurance. Hurricanes, landslides, avalanches and wildfires are all natural disasters that can occur in these areas and make them higher risk and may increase the cost to insure property there. Again, if you buy a condo, insurance for some of these hazards may be included in your HOA dues.
As you can see, there are a lot of factors that go into insuring a vacation home. To minimize confusion, talk to an agent about how you intend to use the property so they can help you get a good understanding of the type of coverage you’ll need. Being informed about the costs of owning your vacation home will make your decision easier. You don’t want costly surprises about vacation home ownership to ruin your vacation. The more informed you are, the more you can relax and enjoy your vacation home.