An estimated 721,000 vacation homes sold last year. If you are one of the many folks sharing your second home with family and friends or generating rental income, don’t overlook protection of your new asset. When it comes to insuring your second home, you may find that the coverage you need is quite different from what you have on your primary home.
The Unique Risks of a Second Home
Your current homeowners policy may allow for coverage of two properties under one policy, but because there are unique risks with a second home, a separate policy may be more conducive to obtaining the coverage you need.
Here are some of the special risks you may need to cover.
1. Long Periods without Occupation
An unoccupied home can invite trouble. Without a presence, there is no one to fix a leak, respond to weather damage, or even report a fire. It also may become a target for burglars.
2. Isolated Location
While seclusion may be a top priority for a vacation home, it also means that you may be far removed from the services that can prevent larger losses, such as a fire hydrant or fire department.
3. Renters
Renting out your home when you’re not using it may be a good idea to offset the costs of ownership. However, having renters (or even guests) may increase your liability to any damage or injury associated with their stay.
Be sure to work with your insurance agent to secure the right coverage. The decision to do short or long term rentals may dictate the type of coverage best for your vacation home.
Protect your Wealth
Discuss the benefit of raising your personal liability coverage to protect you from risk to your wealth that may come with offering your home to guests and renters. In addition to proper insurance, you may want to consider titling your rental home in a corporate entity to protect you from liability or a lawsuit. Your attorney can help evaluate the pros and cons of a corporate entity.
Consult with your realtor or neighbors in your vacation home community to locate a reputable property management company to perform maintenance and look in on your home if you will be away for extended periods. Being properly insured helps, but preventing a claim in the first place is the best strategy.
Final thought.
Are you comfortable with your progress towards retirement? How about helping future generations meet their financial goals? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you.
- - - - - - - - - - - - - - -
About the Author
Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind.
Peak Wealth Planning provides concierge services to meet your wealth management needs. Services include: financial planning, investment management, esop diversification, retirement income, insurance, and estate planning advice. Peak Wealth Planning is a fee-based financial advisor based in Champaign, Illinois, and Fraser, Colorado.