Whether you’re renting, renovating, or purchasing a second home, each situation needs a different policy.
A homeowners policy by design is an owner-occupied product, so if you don’t change the insurance when the situation changes, you could potentially have a problem. Maybe you decided to renovate your home and it takes a lot longer than you think it will, as adding a sunroom turned into adding a second story. Or you leave a second home vacant while you decide to rent it or sell it. Did you sell your home but are now renting back your house until the new owners can move? You need to get different coverage for that as well.
There are so many possible scenarios and each one needs a different type of home insurance policy.
Types of Home Insurance Policies include:
- Primary Residence
- Vacant Homes
- Rental Properties
- Vacation Homes
- Short Term Rentals/Airbnb
Primary Residence Insurance
You must not live elsewhere for three consecutive months during the year for your home to be considered a primary residence for insurance purposes. Once it becomes anything else, like a rental or under construction, the rules change and so should your policy. Primary residence homeowners insurance covers more than just the house itself, it can help you replace items you may not easily be able to afford to replace otherwise if something gets damaged or stolen.
Homeowner policies differ by the type of residence you own and the type of losses you need covered. You can choose from a policy that covers the specified losses you are most likely to encounter or opt for a comprehensive policy that covers a broader range of unexpected events such as:
According to the NC Department of Insurance, sometimes an insurance company’s underwriting guidelines and policies may exclude certain coverages from the primary homeowners policy, such as windstorm or hail and often flood. You may be able to purchase separate coverage to help protect your property against these risks.
If a home is empty for six months, you would want a vacant type policy. Even if you leave your home empty for a few weeks, you could risk voiding your homeowners insurance coverage. The reason is that vacant/unoccupied houses have a higher risk of theft, vandalism, fire, or weather-related hazards, and your premium is based on a lower-risk scenario where your property is presumed occupied. While different carriers have varying policies, most will consider your home “vacant” or “unoccupied” if it’s left empty for 30-60 days or more, depending on your carrier.
A vacant home insurance policy provides protection of your house while it’s waiting for new tenants, owners, or undergoing renovations. Before leaving town for an extended period of time, ensure you have the proper home insurance coverage.
You need vacant house insurance for your property if it is:
- under renovation
- for sale / awaiting buyers
- a secondary/vacation house
- for rent and awaiting tenants
- Or if the homeowner is taking an extended trip or receiving extended medical treatment.
If you are planning on living somewhere besides your home for more than 30-60 days during a renovation, vacant home insurance can protect it from the unexpected.
Does Homeowners Insurance Cover Renovation?
Before you start remodeling or hiring a contractor to work on your home, you may want to revisit your current homeowners policy. Renovations often increase a home’s value thus increasing the cost of repairs in the future.
Before and during your home renovation project, you’ll need to make sure you have the appropriate add-on coverage to cover things that a basic homeowners policy won’t. One add-on is dwelling under renovation insurance, which protects your building materials and your home. With this coverage, materials that are damaged or stolen at any point of your renovation process will be replaced. If you are having windows delivered or marble tubs/sinks that end up being taken, those types of items are not covered unless you’ve attached it to your policy.
Your contractor should have liability, property and workers compensation insurance. Always ask them to provide you with a certificate of insurance when beginning a project.
As the landlord, your coverage is only on the structure itself and your financial interest in it. Your tenant’s personal possessions will not be covered under your policy. Some landlords require their tenants to buy renters insurance before signing a lease in order to avoid disputes arising from damage to the renter’s belongings.
If you own a second home that you lease to tenants, want to rent out a spare bedroom in your house periodically through Airbnb, or make extra cash renting out your beach cottage the weeks you’re not using it, make sure you know which coverage applies to your particular needs.
Short-Term Rentals/Primary Residence
Many homeowners are unaware that you need to have a specific policy in place to make sure short-term rental properties are covered. Short-term rental insurance is commonly referred to as Airbnb insurance, VRBO insurance, or vacation rental insurance. This type of insurance is similar to a personal home insurance policy with slight differences. Making sure you also have liability coverage for this type of situation. If you are leasing out your home and you are sued for negligence of any kind, your liability coverage will protect you.
If you rent out all or part of your primary residence for a short period of time, like a week or a few weekends, there could be two insurance options available, depending on your provider.
- Some companies may allow a homeowners or renters policyholder a short-term rental. Other insurers will require an endorsement or rider to the existing insurance policy in order to provide insurance coverage.
- If you plan to rent out your primary residence for short periods on a regular basis, this would constitute a business. Standard homeowners insurance policies do not provide any coverage for business activities conducted in the home. To be covered you would need to purchase a business policy—specifically either a hotel or a bed and breakfast policy.
Long-term rentals/Second home
If you own a home that you use as a seasonal or vacation home and also rent out, you should make sure that your insurance policy covers you accordingly. You also need to notify your insurance company of any changes in usage of your secondary home.
If you are planning to lease your home to a person or family for a longer period of time, around six months to a year, or renting out a vacation home, you will likely need a landlord or rental dwelling policy. Landlord policies generally cost about 25 percent more than a standard homeowners policy and provide property insurance coverage for physical damage to the structure of the home caused by fire, lightning, wind, hail, ice, snow or other covered perils. It also offers coverage for any personal property you may leave on-site for maintenance or tenant use, such as appliances.
Lastly, it’s a good idea to consider an umbrella policy that will pick up where your underlying property policy leaves off.
Get the right coverage for your specific needs at Dan Thompson Agency, a family-owned and operated firm with decades of experience. Based in Raleigh, we understand the needs of customers in North Carolina. We love what we do and we love serving our community. If you have any homeowners insurance needs or questions on which type is needed for your dwelling, contact us today. We’ll listen to your particular needs, talk about your options, and set you up with the best coverage possible at an affordable price.