How to Protect Your Vacation Home or Rental Home from Loss - Insurance Coverage Overview

Do you own a rental home, vacation home, or investment property? If so, have you reviewed your insurance coverage after the purchase? This short video explains what to look for in your insurance, common coverages or amounts that are missed, and some best practices.

This video is part of an interview between Nathan Donohue and Sophie Riley. Look for our five short releases highlighting each section.

Transcript:

If clients or families are purchasing a vacation home or a rental property, and I think might be helpful also to understand the distinction between a full-time rental, maybe Airbnb's as well. I know that's become a really popular investment strategy for some families.

How does my insurance change if I buy a vacation house?

How does my insurance change if I buy a rental property or an Airbnb?

Great question. Well, I would say we want to break it down to a couple different areas to answer this question.

One,would be if it's going to be a secondary home, like a vacation property, that's just for you and your family, it's very simple. You just add another homeowner's policy, and you have it rated as a secondary home. So, you buy a home in Arizona, your primary is here in Washington. We'd add the Arizona homeowner's policy for that location, and it'd be listed as secondary. And then that home would be listed on your personal umbrella for excess liability as well.

So, whether or not the home is rented to others is going to be kind of the deciding factor on which policy form that we place it on. So, a secondary home, vacation home, is just another homeowner’s form. A home that's rented to others, some insurance companies have that on something called a landlord form. And the policy is actually a little bit different.

And then the next question on, you know, a secondary vacation home is a bit more straight right? Then if you're buying a home as an investment property and it's going to be rented to others, there are a couple different questions that we need to really understand in order to adequately protect you. And that is, you know, the first question is, okay, if it's going to be rented to others, is that going to be on an annual basis where they are going to sign a lease? You're going to recommend renters insurance for the tenants.

It's like a full-time normal traditional rental property.

Exactly.

And those are quite straightforward and simple to ensure as well. And so, we would put that on a landlord policy form. And again, the umbrella would extend over that, and we would indicate the fact that that is a landlord policy.

Got it.

So, I'd have, let's say I have a rental property in Arizona. I have my own individual homeowner’s policy on that, and then I also have my umbrella excess liability umbrella policy would also carry over coverage on top of that as well.

Exactly.

Okay. And then if you have a policy that home that is rented to others, whether it's an annual rental or a short-term rental does make a big difference.

Okay.

And the reason being a shared economy. So, let's think of Airbnb, VRBO, our homes, Uber with vehicles, Lyft, that sort of thing. The shared economy has been growing in popularity over the years, but insurance companies are known for being a little antiquated and not always the best at keeping up with the times. We continue to push for changes to the contracts. I'm always like, hey, when are we going to be able to accept this exposure, right? And so, at this point, a short-term rental,bthat is listed on a vacation rental website, such as Airbnb, it's a common one. That is going to be tricky with many insurance companies, but luckily, we do have markets that will insure them, right? So, it's one of those things where it's not like a one size fits all. Some of the premier companies that we work with that have more sophisticated contract language and broader coverage overall, they are a bit more hesitant to kind of play in that space, short-term rentals. And so, what can happen is they might say what they don't want to be on that exposure.

Well, if that happens, the nice thing about working with a brokerage firm is that we can then move that. We can kind of solve for that problem. So, for example, Safeco Insurance is a company that in the last few years opened up their appetite for that business. So, they have a nice product, good coverage. I can put that short-term rental with safe go, then it's still within one agency. We've just had to kind of move that piece out.

So, it's one of those things that, you know, each situation we approach uniquely. We go to the underwriter, and you know, it's not a one size fits all approach with insurance. We could go to our underwriter on one account, and they say, yes, we're going to make an exception on this. This fits our appetite. In another account that has a very similar exposure could be declined.

So, it's really beneficial for a client to work with an agent who is going to multiple carriers on their behalf to see what we can do to best protect them.

Yeah, so I think that's interesting because most folks would probably default to, I want to bundle, right? And I think a lot of insurance companies want you to bundle. I want to get all my coverage to the same place. But what I'm hearing you say, Sophie, is that it actually might be beneficial for me and my insurance portfolio to say, I'm going to have my homeowner’s policy here. And for my three Airbnb's, that could be covered with a completely different company.

Right. And that might have to be the case. I will highlight that a premier insurance company does tend to want to provide a holistic portfolio. And so, they oftentimes will require a primary home, auto and personal umbrella to be consolidated. So, it's usually to kind of be able to work with these companies.

They're going to require three lines of business. And besides that, we have to break off a policy, you know, a boat or this or that with another company, that's no problem. And we can solve for that.