Whether it’s an oceanfront home on the coast of Florida or a cottage situated high in the Colorado mountains there are a number of reasons your high net worth clients may wish to purchase a vacation home. Some view such properties as retreats from the realities of daily life, others as a natural compliment to their sporting or recreational interests.
Whatever the reason, the threat of a natural disaster, such as the recent wildfires in Colorado or floods in Texas, does not typically cross one’s mind until it is too late. Regardless of location, a seasonal home is often exposed to a variety of unique threats that can be minimized through proactive planning.
Agents and brokers with clients who own vacation homes can help mitigate the risks associated by developing a comprehensive risk management plan for these clients. This plan should identify the perils that pose the greatest risk, outline loss mitigation solutions to address these perils, and provide adequate insurance coverage. Above all, you’ll want your clients to feel confident that they have a customized program that includes preventative measures to protect their home from the unexpected as well as comprehensive insurance coverage in the event a loss occurs.
Some factors to consider include:
PROPER COVERAGE
Does the insurance program provide adequate coverage?
Agents should work with their clients to determine an appropriate level of coverage and carefully choose a carrier with the capacity and financial strength to offer such limits. The ability to obtain appropriate coverage for specific perils is also important. For example, for homes susceptible to flood, their coverage program should include excess flood coverage.
Does the carrier offer replacement cost coverage?
A client’s homeowners’ coverage should include Guaranteed Replacement Cost, yet most policies no longer provide this essential guarantee. This coverage assures that, even if catastrophe strikes, a policyholder’s home will be totally rebuilt even if the rebuilding costs more than the policy limit*. Additionally, the right homeowners’ policy should pay to replace a policyholder’s personal belongings at today’s market value and should offer the flexibility to select the right amount of coverage for insuring these items.
Can non-U.S. properties be covered?
Insuring overseas vacation homes within the parameters of a single program can be problematic. The right carrier must be able to provide coverage options for overseas properties and assure that claims can be handled in a consistent manner.
LOSS PREVENTION
The other half of the risk management equation is loss prevention. A carrier should be capable of offering an array of loss mitigation tools tailored to the unique needs of the individual.
In the case of vacation homes these tools take on added importance.
For example:
• Can the insurance carrier provide expert advice on the selection and installation of storm shutters and other barriers to better protect coastal properties from severe weather?
• Does the carrier coordinate with local fire departments to establish pre-incident plans, especially for properties in remote locations? The experience of a specialist is critical to effectively working with local fire departments to develop and implement such plans.
• Can they provide direction on the latest methods of foam fire suppression and its advantages in areas prone to wildfire?
• Can they provide expert guidance on the home’s proximity to vegetation that accelerates fire and provide protective solutions that balances controlling these elements with natural preservation?
• Does the carrier have specialists who can offer expert advice on the proper
integration of alarm systems and water suppression to mitigate loss? A comprehensive system might include fire detection, sprinkler suppression and low temperature alarms.
Understanding the essential elements of managing risk for clients who own vacation properties is vital in protecting their assets from catastrophic loss.
*capped in some states
Gary Raphael is the director of Residential Services at AIG Private Client Group.
Topics Agencies Homeowners
Was this article valuable?
Here are more articles you may enjoy.
Allstate, Nationwide Post Dramatic Q12024 Homeowners Loss Ratio Drops: S&P 
Home Insurance at $10,000 a Year Shows California Buyers’ Pain 
As Rates Rise, Majority of Homeowners Say Insurance Industry Is in Crisis: Survey 
Ryan Specialty Announces Succession Plan: Pat Ryan to Exec Chair, Turner to Be CEO From This Issue
