This guest post is contributed by Real Estate Unlimited, a boutique real estate agency serving clients in the Los Angeles area.
Insuring your primary residence is a standard part of the home buying process – but insuring a second home is less straightforward. Vacation homes can be costly to insure, and many insurance providers restrict policies if homes are routinely rented out. Even when owners do find insurance, they may need to pay extra for special problems like extended liability or extreme weather patterns.
Are you thinking about buying a second home, either as a vacation home or as a vacation rental investment? In this post, we’ll give you a simple guide to finding insurance you can live with – and rely on.
Planning to Purchase
Ideally, you want to start thinking seriously about securing an insurance policy before you close on a property. Insurance can be expensive, occasionally enough to offset the promised savings of vacation home ownership, so it’s important to account for it in your budget. Your insurance policy may also control the type and frequency of rentals you can offer, which will affect the return on your investment. Another major factor in home insurance coverage – weather damage – is heavily influenced by geography, and it may determine your choice of location.
Researching Insurance Carriers
The best place to start is with your primary insurance carrier. The application process will be more streamlined, and they may even offer you a more favorable rate. If your residential insurance company won’t cover a vacation home, look for carriers in the area where your second home is located. Your real estate agency is a good source for referrals, since they’ll have local contacts and will probably have worked with clients with a similar financial and real-estate profile. You’ll need to answer questions about how your second home will be used – especially if you’re planning to turn it into a vacation rental property – how often it will be used, and who will be responsible for managing the property.