Do I need insurance when renting a vacation home?

As the summer vacation season heats up, insurance agents and brokers may get questions from clients about coverage issues for vacation home rentals.

Here’s a handy overview of what homeowners insurance or renters insurance policy issues should be reviewed and fully understood regarding personal property and other perils as travel plans are finalized.

Renting a vacation home can be a great escape, whether you’re headed to a mountain cabin, a beach bungalow or a city condo. You’ll likely bring various personal possessions along—clothes, luggage, a camera, a computer, sports equipment and even jewelry. For peace of mind, it’s worth determining whether or not your possessions will be covered in the event of loss due to fire, theft or other events.

You may already have coverage

The good news is that your homeowners insurance or renters insurance likely has “off-premises” coverage. This means your personal possessions will still be covered when they are outside your home—for instance, property stolen from your car or from your vacation rental. You will also be covered for the perils listed in your policy, such as fire, theft, vandalism and hurricanes. However, homeowners policies do not cover breakage or wear and tear to your possessions in transit.

family at vacation beach house

Caution: Check for off-premises coverage limits

Some homeowners and renters policies limit off-premises coverage to 10% of the amount of coverage you have for your personal possessions. As an example, if you have $100,000 worth of coverage for your personal possessions, you would have $10,000 for off-premises coverage. Check your policy or ask your insurance professional. If your off-premises policy limits are too low for your needs, you may want to consider purchasing a policy with higher limits.

To help keep track of your possessions and file an insurance claim if necessary, create a “vacation inventory” of all of the items with which you travel. The I.I.I. provides a free Web- and app-based inventory tool, Know Your Stuff®, which makes it easy to store information and photos of your possessions, all in one place. You can also use this tool to record all of your possessions, whether you travel with them or not.

Consider adding a floater to your homeowners or renters policy

If you travel with highly valuable items, such as jewelry, expensive sports equipment or a musical instrument, you may want to add a floater (also called “an endorsement”) to your homeowners or renters policy. This supplement to your policy will cover the cost of specific higher-value items, whether you’re at home or on vacation. A floater will also usually cover “mysterious disappearance,” which means you’re covered if you simply lose the item.

Depending on the type of homeowners or renters policy you purchase, your possessions will be covered on either an “actual cash value” or “replacement cost” basis. Actual cash value covers the depreciated value of the item, not what you paid for it originally or what it will cost to replace. Replacement cost coverage will cover the cost of replacing the insured item, with no depreciation subtracted. Regardless of which type of coverage you have, you’ll first have to pay your deductible—the amount you pay out-of-pocket before your insurance kicks in.

Jun 10, 2015 | By Insurance Information Institute

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