Many owners discover how their vacation home insurance policies cover losses or do not cover losses while processing a claim.  This is not a good way to find out if you are COVERED?

For example, as an owner of a condo you may have coverage for the exterior of the building through the condo association’s master policy and your contents and premises liability may be covered by a Landlords policy or secondary homeowners policy that you purchase.  Many condo master association policies will cover stated perils such as fire, wind, smoke, lightning, and water damage that may occur to your condo and the coverage “normally” extends from the exterior of the building to the studs (framing) of your interior.  In this scenario you may be responsible for everything from the “drywall – wall board in.”  This is where it can get tricky…because insurance companies are not universal in the approach.  Some master policies (the association’s master policy – paid by a portion of your monthly dues) cover up to the studs, some prior to the studs, and some include the drywall.  What type of policies are you covered by?

Chances are that your secondary home policy (your primary is where you reside most often and secondary is possibly your vacation rental) or personal condo policy has an insurance coverage called “building coverages” or “interior structure coverage”.  This is typically a coverage that is set to 10% of what you choose for personal contents coverage and will cover drywall, cabinets, flooring and attached fixtures.  For example, you insure your condo contents for $100,000 and your building protection is automatically set at 10% or $10,000.  This would mean that you would have $10,000 to replace all the drywall, cabinets, and attached fixtures.  Anyone here see a potential for a HUGE GAP?  Of course, but you will not find this out until you have a claim, which of course you will never have a claim right?  WRONG. 

There are several examples of gaps that can and do exist in owners vacation rental home insurance policies including many major insurance carrier policies that do not cover for theft or vandalism for rental home policies, reduced guest liability coverage for secondary homes, reduced additional living expenses (coverage if the home is not habitable due to a covered loss), mold exclusions, and the list goes on.

The best advice is to consult with a professional insurance agent that represents A rated insurance carriers.  You need to be specific in your questions to the agent or Representative.  Some owners try to hide the fact that they rent their home or vacation rental to others to perhaps save premium – NOT A GOOD IDEA.  First off it is misrepresentation and it does not give the agent the opportunity to recommend what is best for your needs.  A home insurance policy, a secondary vacation rental policy, landlords policy and condo insurance policy all have completely different limitations, exclusions and available amendments.

Don’t just review your coverages – get advice from professionals who see claims come across their desk daily.  In closing, here’s one that many people and even some insurance agents are not aware of – sewer back up – is it an amendment to the policy or standard?  How about the gap between the deductible of the association for water damage to the roof and the damage to your interior?  Insurance policy navigation can be overwhelming, but don’t bury your head in the sand or throw your policy renewals in a drawer, make a list of your questions and contact your agent or insurance company to be sure you have not only the right coverage but the correct policy for your vacation rental.