Insure your holiday home – four basic rules

Finding and maintaining the right property and liability insurance for your vacation rental can be a challenge. Most vacation rentals are in high-risk areas like low-lying beach towns or in state forests, and that alone can make finding insurance difficult. Add to the equation that the property is rented out on a part-time basis and things can get really complicated. Here are a few basic rules to follow to protect you and your property from insurance nightmares.

Rule One – Honesty is the best policy

It is imperative that you are completely honest with your insurance agent if you intend to rent your property for a short term. If a guest staying at your property causes damage or files a lawsuit against you, your insurance agent will investigate your rental activity. If you have not disclosed that your property is a holiday home your insurance policy may be void and you are fully exposed. Be honest from the start. Sure, it will mean a higher premium, but it’s not worth risking your life savings.

Rule Two – If you don’t succeed the first time, try again

When purchasing insurance, start with the companies that have your current homeowner and auto policies. It’s always cheaper to bundle your coverage with one company. But don’t be surprised if you get rejected. Vacation rental insurance is a specialty and most traditional companies don’t have what you’re looking for.

Ask your agent for a recommendation and check with other landlords in your area. You will likely have several recommendations and one of the companies will be a good fit for your needs.

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Rule Three – Ask the right questions, give the right answers

It’s important to use the right language and ask the right questions when speaking to an insurance agent. Never tell your agent that your property is vacant. The correct term is “uninhabited”. A vacant property is a red flag that will deter most insurance companies.

Holiday rental insurance usually falls under the “excess insurance” category. The companies that specialize in this type of insurance are Lloyd’s of London, AIG, Lexington and Allied Insurance. If your current insurer can’t cover your rental property, ask them for a referral for excess lines.

Ask your insurance agent how much liability insurance you should carry. The minimum is usually around $1,000,000, but the amount can change depending on your financial situation. It’s just common sense, when you have more to lose, you want more liability coverage.

You will be asked for the name of your property manager and need to be prepared. If you are a tenant and are asked who manages your property, provide the name of your housekeeper or caretaker. The insurance company will want to hear that someone is available in an emergency. If you haven’t set up a third-party contact, you could potentially raise another red flag.

Rule 4 – Check the financial status of your insurance company

There are hundreds of insurance companies trying to get your business. If you come across a company whose prices and terms are too good to be true, be very wary. There are really “flying” insurance companies out there, and if there’s a flood or an earthquake, they could be wiped out financially.

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The place to check an insurance company’s financial status is www.ambest.com. Enter the name of the insurance company and you can get a little history of that insurance company, how long it has been in business and what its financial status is. What you are really looking for is an A-rated company. Don’t go back to elementary school thinking B and C are good. You really want an A-rated insurance company.

Insurance is one area of ​​vacation rental management that you can’t afford to cut corners on. There are too many things that can go wrong, and the notion of “better safe than sorry” is the number one rule of the insurance game.

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