Vacation and Secondary Home Insurance
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A vacation or second home or condo comes with extra risks you might not have with your primary residence.
Insuring a vacation home is often more expensive than a primary residence. You don't stay there as often, which makes it a bigger target for theft. Plus, you won't be there to intervene if a small fire starts. Many vacation homes are also located in remote areas, with far-away fire departments.
Cost to insure secondary or vacation homes
To insure a vacation retreat, simply purchase an independent home insurance policy for the seasonal residence. The premium price is based on the same factors as any other home: the replacement cost value, the deductible you choose and other applicable risks. However, the rate will be higher than if the home were your primary residence.
Insuring vacation homes is more expensive because usually they are uninhabited and at a higher risk for claims. For example, if a vacation home catches fire and no one is there to call the fire department, the loss could be catastrophic — especially if the home is in a remote location. While this is an extreme example, it helps illustrate the greater likelihood of filing a home insurance claim.
Some companies have different surcharges, depending on specific secondary home circumstances. For example, American International Group (AIG) differentiates the risks of secondary homes by whether a full-time housekeeper lives in the home, a caretaker lives on the grounds of the estate or a maintenance company checks on the home. Different AIG surcharges are broken down in the chart below. A "supported" home is a secondary home insured along with a primary residence. An "unsupported" vacation home is insured by AIG with no policy for a primary home.
AIG secondary home surcharges | Post-surcharge cost of a $1,000 premium | |
|---|---|---|
| Supported | 20% | $1,200 |
| Unsupported | 30% | $1,300 |
| With a full-time caretaker (lives in the home itself) | 10% | $1,100 |
| With a full-time caretaker (lives on the grounds of the estate) | 15% | $1,150 |
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Do not make false statements or mislead your insurance company into thinking your secondary home is your primary residence. It's not worth the risk. If you file a claim for your vacation home and the company discovers you lied about the home's status, they would likely deny your claim and either cancel or not renew your policy. It makes no sense to pay for a policy, even a cheap one, that could deny you coverage.
Ways to lower your vacation home insurance premium
The luxury of having a vacation home often comes with a higher price tag, including the insurance bill. But there are ways you can save on the home insurance premium. The cost of most improvements to a second home will generally outweigh what you'll save on your premium, but they can lower your rates.
For example, policyholders get a discount for a home with a central alarm system, but your premium savings will be far less than the subscription fee for eligible systems. This doesn't mean there's no value in installing a central alarm system, especially in a home that's unoccupied most of the time. It's a smart defense against burglary.
Making a vacation home more secure mitigates the risk of something happening to it and reduces the likelihood of a claim. That's what is most important. Remaining claim free is vital to keeping the cost of your second-home insurance premium down. For example, if you've been a policyholder with State Farm for under two years and have one paid claim, your premium will increase 15%. If you have two claims within a three-year period, it will go up 35%.
In addition to the discounts a primary residence would receive, a home insurance policy for a vacation home usually qualifies you for a bundling discount.
Other coverages you might need to purchase
In addition to a home insurance policy for your secondary residence, you should consider whether you need flood and earthquake insurance. Flood and earthquake damage are not covered by standard home insurance policies but might pose a serious risk to your vacation home, depending on where it's located.
For example, if you have a beach house on the Florida coast, a storm surge (an abnormal rise in tide) from a hurricane could flood and damage your property. Or, your Southern California retreat might be in a high-hazard area for earthquakes.
You should consider this before buying a seasonal or vacation home, because the price of flood and earthquake policies can be high. In California, the average cost of earthquake coverage is $1.75 per $1,000 of coverage, meaning a $250,000 home would cost $437 per month to cover. That's in addition to the cost of your standard home insurance policy.
Vacation home rental insurance
Renting out your vacation home is a great way to offset the cost of owning one, but you need to make sure you understand the insurance ramifications before doing so. Depending on the frequency and length of stays, you might need to notify your insurance company or get a separate landlord insurance policy.
If you're thinking about renting someone else's vacation home for a short period of time, you probably already have the coverage you need through your existing home or renters insurance policy.
Most companies have "off premises" coverage for personal possessions. Check if your policy includes this coverage, and make sure you fully understand the details. There is often a limit to the amount you can claim — usually 10% of the replacement cost value of the home the policy covers. If you're bringing possessions worth more than that, consider adding an endorsement to your policy before your trip.
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