3 Things You Need to Know About Insuring Your Vacation Home

Ready to purchase a summer home along the coast or a winter home in the mountains? Although it may seem like a cant-miss investment, a vacation home could prove to be more expensive than you think, especially when you consider what it takes to insure this residence.

Believe it or not, vacation home and homeowners insurance are not interchangeable. Even though vacation home insurance may offer some of the same coverage as a typical homeowners policy, certain exceptions could apply.

What differentiates vacation home insurance from a homeowners policy? Here are three things you need to know about insuring your vacation home, and why you may need to add vacation home coverage to guarantee youre fully protected.

1. Consider that your vacation home may serve as a temporary residence.

The U.S. Bureau of Labor Statistics BLS reports the average consumer spent 258.59 annually on vacation costs food, housing and other living expenses in 2014. But as a vacation homeowner, youll likely need to account for these costs and many others.

For instance, if you spend only a few weeks each year at a summer home on the beach, youll still need to ensure this residence is protected against hurricanes and other inclement weather year-round. Youll also need to insure your summer home based on the fact that this residence may provide only temporary housing, which means youre not present to maintain this residence in the same way an "average" homeowner would take care of his or her house regularly.

Homeowners insurance covers the "average" homeowner, i.e. someone who spends the majority of his or her time at a residence. Since your vacation home serves as a temporary residence, however, youll need an insurance policy that accounts for the fact that you may spend only a portion of the year at this house.

2. If you rent your vacation home, you may need additional coverage.

Vacation homes may provide supplemental income because they enable you to rent your residence to guests at various times throughout the year.

In fact, market research firm Statista reported U.S. vacation home rentals topped 22 million annually last year, and this total may surpass 37 million by 2020.

But consider this: Would an average homeowner rent his or her house to visitors? Of course not As such, youll need insurance that accounts for guests who stay at your vacation residence temporarily.

Your homeowners coverage will likely not apply to vacation home damage caused by a renter, so you may want to add extra coverage against damage to your vacation house. You also might consider additional liability, bodily injury and medical payment insurance to minimize your risk when visitors stay at your vacation home.

3. Youll want to account for insurance costs before you purchase a vacation home or rent your vacation home to guests.

Before you dot the is and cross the ts on your vacation home purchase agreement, consider your insurance costs. By doing so, youll know exactly what it will cost to guarantee youre protected against a wide range of dangers that otherwise could damage your vacation home and its long-term value.

Purchasing a vacation home represents a major investment, one that should not be taken lightly. If you understand your vacation home insurance options, you should have no trouble optimizing the return on your investment.

Vacation home insurance costs may vary based on risk factors such as the location of your residence, the age of your home and its amenitiesall factors that could impact the cost of your homeowners policy, too.

Comparatively, with your vacation home insurance, youll need to account for problems that could arise when your home is unoccupied, including theft, vandalism or undetected damage like when a water pipe bursts.

Keep in mind that these issues may occur in an average home as well. On the other hand, an average homeowner is more likely to detect and address such problems immediately as opposed to a vacation homeowner who spends only a few weeks a year at a particular residence.

Like any residence, your vacation home represents both an opportunity and a risk. If you devote the time and resources to evaluate rental home dangers, you can learn about these risks and insure your vacation home accordingly.