May 28 | Posted by Barry Cohen

If you don’t already own a vacation home, this winter was probably enough to convince you to get one.  If you are in a position where you can pick up and get away from it all for more than a couple of weeks a year, a vacation home is not only a haven from the cold, but can also be a solid investment.  A mountain retreat, waterfront or island property or beach house can provide great getaways for years to come while adding to your portfolio.

There are many things to consider, especially if you are buying a property outside of Canada, and working with a specialist that knows the laws and implications is a must.  Once you have selected your property, arranged for financing if necessary, satisfied all the legalities and jurisdictional criteria you have to think about insuring your new acquisition.  Many new owners are surprised to find that the insurance on their vacation home costs more than their primary residence.  There are three basic reasons for this “sticker shock” as outlined below.

  1. Your Second Home Is In A Vacation Spot.  The beach, the mountains or proximity to a lake or river comes with additional risks.  Obviously being near a lake or river increases the risk of flooding which is not covered by either standard home insurance or by a second-home policy.  You will need a separate policy for that – the cost increases dependent on the flood risk.  Many coastal areas are susceptible to high winds and hurricanes so expect to pay for a separate hurricane or wind deductible that is generally based as a percentage of the home’s value – usually between 1 and 5 percent though sometimes higher.  Your mountain retreat comes with a higher risk of mudslide or landslide, neither of which is covered by a standard policy or even earthquake insurance.  For mudslides you will actually need flood insurance and for landslides you will need “difference of conditions” coverage.
  2. Your Second Home Is Vacant Part Of The Year.  Insurance companies place a red flag on property that is unoccupied for more than 30 days at a time and increase their premiums accordingly.  Damage to a home can worsen substantially when it’s not immediately detected because the home is unoccupied part of the year.  Break-ins are more likely in a vacant home and because no one notices, there could be more break-ins during that time.
  3. Your Second Is A Rental Part Of The Year.  If you rent out your second home you will likely need a landlord policy which can cost 10 to 20 percent more than standard coverage for a second home.  The landlord policy will cover damage to your home caused by tenants and protect you in case your tenants or their guests are injured at our home.

The best advice for ensuring your peace of mind regarding complete insurance coverage for your vacation property is to deal with an experienced, reputable insurance broker that is familiar with international property laws and requirements.