The most important decision you will make to protect your property investment, is the nature and quality of your insurance coverage. There are types of coverage you don’t want to do without, and there are techniques to save money on your premiums. When deciding on your insurance program, you need to determine the risks you want to cover, and ensure that you obtain adequate protection to neutralize those risks.
From an insurance company perspective, it is all about rating risk and being paid premiums to cover that risk. If there is a risk you did not insure for specifically, the insurance company will deny the claim. You will be out of luck and out of pocket. Business is business.
Here are some tips you need to know to insure your peace of mind, and save money on discounted premiums while doing so.
Personal Liability Protection
This is the part of the policy that protects you if you are sued. If someone injures himself or herself on your vacation property, eg falls on your stairs, slips on your driveway, deck, or dock, etc., and a court determines that you are responsible and therefore liable, your insurance company should defend you in court and pay all legal expenses and the amount up to the limit of the policy. The normal minimum limit is $1 mil-lion. However, you can and should increase this amount. It is recommended that you increase your coverage up to $5 million minimum. The extra premium is normally very reasonable. Your personal liability coverage is for you personally, and covers your liability outside of your home as well, eg if you accidentally injure someone while travelling on holiday. Make sure your spouse or partner is also covered by the policy, whether they are on title of your vacation property or not. Make sure your primary residence coverage is high as well.
There are specific exclusions that apply to this section of the policy. They are listed under the heading “Loss or Damage Not Insured.” Make sure you read this carefully.
How to Avoid Being Sued
Every year, many people are injured while visiting the premises of others. The last thing you want is to be sued. The process is stressful, time-consuming, neg-ative, protracted, and uncertain. If you are renting to a year round tenant, your contract should cover hazard reduction and require the tenants to have tenant insurance coverage as a condition of your tenancy agreement. You should receive a copy of the policy. If you are your vacation home for short-term rentals year-round, seasonally, or periodically, you want to make sure you have coverage for this type of usage. Here are some suggestions to avoid problems.
Maintain your premises. Most injuries are caused by “slip and fall.” They are usually the result of a lack of maintenance. In winter, you should clear ice and snow from all walkways on your premises. Exterior steps should be kept in good repair and a handrail provided. Inside your house, carpets should be secured to stairs and floors and kept free of toys or objects that could trip a visitor.
If you serve alcohol to guests, you could be found responsible, to some extent, for their subsequent actions. Some courts have gone to extraordinary lengths to assign responsibility to a host. Good judgment is required. In particular, never allow an intoxicated guest to drive a car or boat.
Look for other hazards. You are potentially responsible for everything that happens on your premises.
Title Insurance
This insurance protects you in the event that pre-existing property defects show up after you bought the property. You would be covered up to the amount of your policy for as long as you are still the property owner.
The types of risks that are usually covered include: claims due to fraud, forgery, work orders not complied with; zoning and setback non-compliance or deficiencies; survey irregularities; forced removal of existing structures, and unregistered rights of way or easements.
Ways to Reduce Your Premiums
Many people don’t realize there are ways to reduce the premium payment significantly. What exactly do you want protection for? What you are really concerned with is the possibility of a catastrophe or a total loss. If so, you can save money by increasing your deductible. By doing so, you save the insurance company the expense of investigating and settling small claims. That saving is passed back to you in the form of a reduced premium.
You should never reduce your amount of insurance so that you pay a lower premium. If you ever do have a claim, it could cost you a lot more than any amount you might save.
