Homeowners’ policies — including vacation homeowners’ policies — generally do not offer coverage for flood damage. Since many vacation rental homes are waterfront homes, flood insurance makes sense for these properties.
Protect Your Waterfront Vacation Rental Home Against Flood Damage
Flood insurance is a different type of coverage than a homeowners’ policy. If you have ever dealt with flood damage in the home where you live, you know how overwhelming it can be. Imagine dealing with flood damage at a second home located far away.
Depending on the location of your vacation rental home, flood insurance may be an extremely smart investment. Here are some key points to know when it comes to flood insurance for your second home.
- Flood insurance is required in high-risk flood zones. Mortgage lenders usually require owners of homes in high-risk flood zones to have flood insurance against flooding caused by natural disasters. Insurers use an elevation certificate (EC) showing the home’s elevation compared to high flood water risk to help calculate the premium.
- The National Flood Insurance Program (NFIP) offers flood insurance in specific areas. It can be expensive, but it may be your only option for buying flood insurance. Some insurance companies sell NFIP policies, and there is a 30-day waiting period after the purchase before coverage goes into effect.
- Even if you are not obligated by your mortgage company to buy flood insurance, it may be worthwhile. If the property is close to a high-risk flood zone, it is definitely wise. Flood insurance outside of high-risk flood zones is typically less expensive, so it is definitely worth exploring.
- It’s best to understand the local flood history before buying your vacation rental home. Flood zone information is usually included in the MLS listing since drainage or flood problems are required to be disclosed by the seller. Mortgage lenders should explain contingencies involved with buying a second home in flood zones as well as any requirements for buying flood insurance.
- Many buyers choose to mitigate flood hazards through structural changes. Some changes are quite simple, like cleaning downspouts and gutters or elevating air conditioner units. Your flood insurance agent can discuss ways to negotiate the costs of flood mitigation with sellers to manage your costs more effectively. Additionally, NFIP policies may help with some of the cost of flood mitigation expenses such as sandbags or water pumps.
Always consider the costs of flood insurance and flood mitigation measures before purchasing a waterfront home.