Canadians own a variety of properties, such as a primary residence (single-family detached home, condo, or townhome), vacation property, cottage, and/or investment property. Typically, homeowners are quite knowledgeable about house and condo insurance, but when it comes to cottages, many people are unaware of the key differences that come with cottage insurance. Vacation properties and cottages are not cheap – failing to properly insure them can turn out to be costly for the homeowner.
So, what are the key differences between conventional home insurance and insurance for your cottage?
|Topic||Home Insurance||Cottage Insurance|
|1. Insurance providers||Every property and casualty insurer (P&C) in Canada offers home insurance. Most P&C insurers, such as Intact, Aviva, TD Insurance, RAS, etc., also sell car insurance and offer bundle discounts if you buy both products from them. Others, like Square One Insurance, focus on home insurance only.|
|Cottage insurance is also sold by almost all P&C insurance providers, but a hidden aspect is that they often require you to have your primary residence insured with them as well. This limits your choices.|
|2. Maximum property value covered||There are no clear coverage limits when you buy home insurance – your building will be covered for the value of rebuilding the property in the case of a total loss.||Many insurers see cottage properties as a higher risk since, a lot of the time, nobody oversees the property. Therefore, some insurers may cap the level of coverage for vacation homes at around $300,000. However, this varies based on the property, location, frequency of occupancy, etc.|
|3. Sewer backup coverage (also called septic backup)||Most home insurers offer, for an additional charge, optional sewer backup insurance (or a sewer backup rider).|
|Although some insurers offer sewer backup for cottages, most will EXCLUDE and not cover this risk.|
|4. Overland flooding||Most home insurers started offering this as optional coverage in Canada. Sometimes carriers, such as Aviva and RSA, bundle it with other water or flood-related coverages, such as sewer backup.||Many insurers will EXCLUDE this risk from their cottage policy. The reason being: recreational properties are usually located next to lakes or rivers, which increases the risk of flooding. Also, not being at the site all the time to mitigate the issue increases the risk even further.|
|5. Excluded perils||A full home insurance policy typically covers a very wide range of possible risks.||Many providers will have a long list of perils that are not covered, such as roof damage from excessive snow.|
Since the property is not occupied year-round, the risk of an issue like this going unnoticed until it causes damage is quite high.
|6. Burglary vs. theft||Although insurers distinguish between burglary (forced entry and stolen items) and theft (you forgot your keys in the lock and left; a thief took advantage to walk in and steal items), in many cases, both will be covered.|
|Cottage insurance typically covers burglary, but it will likely deny theft, especially if your belongings were left outside. Consider securing barbeques, equipment, etc. in a garage.|
7. Rental properties
|Insurers will have no problem covering long-term rentals, and some are even covering properties that are used on Airbnb. In this case, though, you need to let your insurer know that you offer short-term rentals, and you must expect extra premiums.|
|Insurers are less inclined to cover your rental recreational property, especially if it is rented out on a short-term basis.|
8. Path to the property
|This topic is normally never an issue with your primary residence or investment (rental) property. Most properties will have a well-maintained and frequently used driveway or path.||Many vacation properties, cottages, and chalets are not easy to reach due to unploughed roads in the winter, unpaved paths in the wilderness, or simply due to being located on an island. This limits your choice of insurers and results in higher premiums.|
As you can see, getting cottage insurance is a little trickier than getting a standard house, condo, or townhome policy. Although there are more considerations to account for when insuring a cottage or vacation property, once all the coverage is in place, you will find that it’s worth the challenge when you are sitting by the lake shore, enjoying a campfire with some smores, or when you are resting in your mountain chalet with a glass of wine after a day of skiing.
These insights are shared by InsurEye, a Toronto-based company that educates and informs Canadians about insurance through its insurance review platform, and about real estate through its condo review platform, CondoEssentials.