Insurance is going to cost you more on a second home, and there's a simple reason: You're not there as much. You should check out our Homeowners Insurance section for a more extensive discussion of savvy insurance shopping. But here are several tips on how to trim your second-home bill and how to make sure you have enough coverage.
A central alarm system that detects both fire and burglaries can cut a quick 20% off the top, insurance salespeople say. A basic system costs around $300 to install, depending on the number of zones and sensors in your system, according to alarm company ADT. Expect to pay $70 and up for service each year.
A Watchful Eye
Owning a home in a gated community warrants a 10% discount. For homes in rural areas, proof that the local fire department has access to a stream, lake or other water source can mean a break of 25%. And while you won't get a discount for hiring a caretaker, having one will convince some insurance companies that you're worth the risk when otherwise they'd turn down your business.
Combine and Conquer
Your real estate broker may suggest that you call his local agent for the best rates. But you're actually better off revisiting the agent who sold you coverage on your first home. By insuring your second home with the same company, you should be able to save 5% to 10%. And if you can get one of the insurance industry's new "package policies" -- which can handle two or three homes, a couple of cars, umbrella liability coverage and even a boat in one document -- you'll do even better.
If you're buying a condo instead of a free-standing home, the condo association will provide coverage for the structure. That's part of your monthly maintenance fee. But you're responsible for fixtures, appliances in the condo, and typically any kind of improvement, like a gourmet kitchen or whirlpool bath, as well as your own contents and liability.
If you didn't have an umbrella liability policy before you bought your second home, you have enough assets to warrant one now. An umbrella will extend the liability limits (typically $300,000) on your homeowners, auto and even boat policies for a reasonable sum. Insurance experts recommend a minimum of $1 million in umbrella liability for people who own two homes. That'll run about $300. For landlords, umbrella policies are especially crucial. If one of your tenant's clumsy friends breaks an arm diving into your pool, his lawyer may soon be knocking on your door.
Insurance and Landlording
If you rent out your vacation home, you can expect to pay 20% over the cost of ordinary second-home insurance. That's because you'll be there even less than most second-home owners and insurers feel your house is at even greater risk. Besides, they argue, no one takes care of a property as well as its owner. But if you're planning to rent it out a lot, say so. Though it sounds contradictory, some insurers such as Chubb will charge you less if it looks like there will usually be tenants around. An occupied house is less likely to be burglarized or burn to the ground.
Most second-homeowners rent their properties furnished, but if you rent empty, make sure to let your insurer know; you'll get a break on contents coverage. And if your tenant brings his belongings into your house, he's on his own. He can't claim anything under your policy, and although 10% of the contents insurance from his primary residence follows him into a rental, it's not likely to be enough in a disaster. You might require longer-term tenants to carry renter's insurance.