It is fair to say that we have all dreamed of owning a cottage. For some of us, it remains a pipe dream, but for others, the thought is more concrete. Whether near a lake, in the middle of a forest, or near a ski hill, a cottage gives you a chance to re-energize and clear your mind.
To be able to fully benefit from your home with peace of mind, it is important to know about the insurance coverage available for cottages. First, there are two types of insurance: insurance for secondary homes and insurance for seasonal homes. Here is some information that will help you determine the type of insurance for which your home qualifies:
1. Frequency of visits
- Can your cottage be lived in throughout the entire year?
- Is the path leading to your home accessible at all times?
- Is your cottage located on an island and therefore not accessible by land?
2. Value of the home
3. Available facilities and utilities
- Does your home have a toilet, running water, and electricity?
4. Use of your home
- Is your cottage only used during hunting and fishing seasons?
Most cottages valued at under $125,000, which do not have a toilet or electricity, are generally categorized as seasonal homes. Cottages valued at over $125,000, which have a higher frequency of visits and are accessible at all times, are often referred to as secondary homes.
The difference between the two categories of homes is not limited to their names. There are significant differences with regard to the coverage and riders available for each type of home. A secondary home qualifies for essentially the same coverage as your primary residence, i.e. coverage under an all-risk basic policy and, in terms of riders, for escape of fuel oil, above-ground water damage, and ground water and sewer back-up damage. For a seasonal home, the only coverage available is under a named-perils basic policy. Seasonal homes cannot be covered under riders. In addition, unlike a secondary home for which everything is included in your policy, coverage for theft and vandalism for seasonal homes is only available separately.
For owners who choose to make their investment profitable by renting out their cottage, there are several options available. First, there is now a wide range of platforms on which you can post your rental listing, such as Airbnb, HomeAway, and MonsieurChalets. It is of the utmost importance to know that you are required to notify your insurer of all rental activities, since they are considered professional activities.
In terms of insurance, there are some insurers who can cover you for up to 30 days, per rental year, without an additional premium. However, make sure to check with your insurer that this option is available in your insurance policy. If it is not or if the rental time exceeds 30 days, you will then require specialized insurance. At Lareau, a number of the insurers we do business with offer this type of product. In addition to short-term rental coverage, some insurers offer coverage through riders for loss of income, theft occurring during rental, and vandalism.
To sum up, when it comes time to insure your cottage, it is important to determine what coverage is available to you. Some exclusions, such as coverage for water damage, theft, and vandalism, could lead to huge financial impacts in the event of claims and under-insurance. To make sure that you are well covered, contact a Lareau broker who will be able to provide you with an insurance product that is adapted to your situation, so that you can relax with peace of mind!
To find out more about short-term rental insurance, watch the complete interview by our broker.