This week's Q&A focuses on the upcoming summer vacation season and a question that we get asked all the time as insurance agents:
"If I rent out my second house, does my insurance cover that?" The short answer is: Maybe. The long answer is: Keep reading. Different Companies have Different Underwriting The first place you need to look is in your homeowner's policy - but you'll have to do a little digging. The first part of your policy is called your Declarations Page, it shows us your basic coverages such as the amount your house is covered for, what optional coverages you may have purchased on that property. If you leaf through your paperwork, you'll come to the Definitions section where the contract clearly spells out the who, what, why and how. For example, my policy with Utica First Insurance Company clearly states that "Insured means you" and then lists a few other other definitions of "Insured". Should I be renting out my house, and something was to happen to it, Utica would likely deny the claim since I am not the one living there at the time of the loss. My policy is also written as what is called an HO-3 Form policy; a primary homeowner's policy. These usually exclude any liability or property damage coverage due to being used as a rental unit.
Further down, we even have a amended endorsement specific to New York state where my home is, this endorsement gets pretty specific saying that "If you own and reside in..." That's a pretty clear "NO" to the question! So how do I get this covered? You have to have your policy insured with a carrier who allows for short-term rental usage. There are certain providers who specialize in writing homes that are used for Airbnb, VRBO and the like. They achieve this by writing an endorsement to allow for incidental rental use. If your property is solely a rental unit, then that would be written another way - as a rental property, or Dwelling Policy (DP). These premiums are typically higher in cost (due to the higher risk) but properly protect you as a property owner should a tenant damage or destroy your property. On the national level: Foremost Insurance has a great program for short-term rental properties as well as permanent rental properties. They cover a range of property values, and owners with perfect and not-so-perfect histories. Within New York & select other states: Local mutual or cooperative companies are the best way to go. These companies are smaller, have more flexibility in their underwriting and are accustomed to writing these risks at the local level. What does it cost? If I had a dollar for every time I was asked this, I wouldn't be writing this post.😂 But realistically, that all varies based on your homes value, if you've had prior claims and mostly where it is located. Typically we see premiums around the $1,000+ mark when including the proper endorsements to make this policy feasible. But recently we have quoted a few short-term rentals that fell far under that. It all really depends on those factors I mentioned above, and how familiar the company is with writing those types of policies. Looking to insure your seasonal or secondary home? Give an independent agent a call. I'll be ready to talk! 1-800-424-9712 Available in NY, PA, TN, VA, OH, SC & FL www.encompassupstate.com
Taylor M Haines is Chief Executive Officer & Principal of the Encompass Agency, Inc., a virtual insurance service based in Buffalo, NY. He holds a Master of Science in HR Development from Buffalo State College (2016). Taylor has been in the insurance business since 2012 and writes all lines of personal and commercial insurance across five states. He and his wife, Megan, reside in South Buffalo with their children Ada & Dax.