Housing prices have been steadily climbing since the beginning of the year (Standard & Poor’s/Case-Shiller 20-city index). If this trend continues through the rest of 2012, this will be the first year of rising home prices since 2006. This good news, however, should be met with guarded optimism – especially when it comes to second homes.
Despite real estate cycles, in general, vacation homes are still not appreciating. The insurance industry – specifically the excess and surplus (E&S) market – is responding by providing or tweaking coverage so you can capitalize on the shifting needs of customers dealing with the vacancy of such homes. Dwelling fire policies are a case in point:
- There is an increasing need for dwelling fire policies for seasonal dwellings with short-term rentals and for previously unrented year-round dwellings with longer leases. We are seeing it for modest lake cottages, multimillion-dollar dwellings in upscale resort areas and everything in between.
- In some cases, property owners who once used their vacation homes exclusively themselves have been forced to rent those properties on a short-term or seasonal basis. These owners need dwelling fire coverage even if renters have their own insurance.
More and more homeowners are leaving their homes vacant because they want to move but cannot find a buyer. Circumstances like this underscore the importance of having the right mix of liability protections:
- Make sure the owner has the proper amount of liability coverage on a primary home. Then determine whether it will descend to a secondary home. Sometimes it does. Then limit a vacant home to premises liability to avoid duplicate coverage.
- Vacant homes are often viewed as a less attractive risk than rentals because small problems can go undiscovered for long periods of time, becoming big problems. Switching a home from vacant to short-term rental status is one solution because the rental property can qualify for better coverages than the same house as a vacancy.
Placing these risks requires the kind of flexibility and speed that is possibly only through successful market relationships. Burns & Wilcox has established long, collaborative histories with such underwriters. The ability to customize forms and write outside-the-box of prescribed conditions is extremely important in retaining clients in the face of the changed housing market.