Homeowners and Condo Association Insurance and Vacation Rentals

Cottage Insurance Arizona

Many people have taken advantage of lower interest rates in recent years to purchase a second home or condo that they can use as a source of income through renting it out as a vacation rental. This can be quite a lucrative venture, as some desirable rentals in resort areas (such as on a lake) can fetch $700 to $1000 per week from tourists and travelers. If you are renting your home to strangers, you’ll want to make sure that you have the proper insurance to cover you. Your standard homeowners or condo association policy might not be enough.

For example, a condo association generally has a master insurance policy or a blanket policy that covers the common grounds and insures the exterior walls of the building but won’t cover the interior walls or contents of the building such as furniture. They also won’t cover your vacation renters if they are hurt on your property. For those situations you’ll have to purchase your own condo or homeowners policy that includes liability coverage.

Arizona Vacation Rental Insurance

If your vacation rental is on or near the coast or in a floodplain, you’ll also want to consider purchasing hurricane or flood insurance. Hurricane coverage is generally flood and wind coverage, which are purchased separately from your basic homeowner’s policy. If your vacation rental is in a high risk area, the premiums for these types of coverage will be more costly. You will want to do some of this insurance shopping – especially special insurance endorsements such as flood coverage – before you even buy a vacation rental property. This is because you may find out the “great deal” you are getting on a mortgage payment on a rental property might not look so great once you add hurricane insurance premiums of $3-$4,000 per year to your monthly house payment. This can seriously cut into your potential profit on a property.

Another additional insurance coverage you may want to look at is rental insurance which covers your property in case you have a loss of rental income due to a natural disaster, flood or fire. If you are counting on a regular rental income in order to make the mortgage payments on your rental property and you suddenly lose those payments, you could be in danger of foreclosure.

There isn’t really an entire policy designed specifically for owners of vacation rental homes or condos, so you’ll have to work closely with your insurance agent and ask a lot of questions about your coverage to design a policy that works for you.  Don’t just hope that your regular homeowners or condo association insurance master policy will protect you. Once a claim is filed, such as a personal injury claim, and the insurance company finds out the home is a rental and not your primary residence, they may decide to cancel your property or deny the claim.  In that situation, you could be out thousands of dollars of your own money. Be smart and get the right coverage. Make sure it is affordable and makes sense before you buy a property. Remember that a vacation rental is really a business, and should be covered just like a business would.

If you want to know more about home or condo insurance, click here to get a free Arizona Home Insurance quote or a free Arizona Condo Insurance quote.

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