Now Offering
In-Person &
Virtual Meetings

Book Now Book Now

Exploring Cottage Insurance for Your Home Away from Home

Exploring Cottage Insurance for Your Home Away from Home

understanding cottage insurance

understanding cottage insurance

In the wake of the COVID-19 lockdown, the demand for cottages has skyrocketed, causing recreational property prices to reach new heights. While many were purchased by city dwellers looking for a weekend escape or as a work-from-home solution, others were bought as a lucrative recreational property investment, largely for vacation home rental.

Whether you embrace the weekend cottage lifestyle, the investment possibilities, or a bit of both, cottage insurance is essential. But, how do you know just how much insurance you need and what options to look at? To help you navigate through the waterways of insurance these are a few things you’ll need to know in terms of the types of coverage, renting out your cottage, and more.

Firstly, what is cottage insurance and what does it cover?

Cottage insurance is straightforward – it’s property insurance for your vacation home. Most insurance companies will give you cottage insurance only if they also insure your main home, as per the Insurance Bureau of Canada (IBC).

With a cottage insurance policy, you’re covered for damages to your property and structure, along with liability coverage in case someone gets hurt on your property. You get to choose whether you want full coverage or just specific aspects. It’s crucial to figure out if your policy covers the property’s cash value or its replacement cost (the better option), and whether it accounts for rebuilding following the latest building codes or not. This part can be a big deal, especially if you need to replace an old building after something like a flood or fire.

What doesn’t fall under cottage insurance coverage? 

Depending on your policy, things like septic bed backups, vehicles with engines, structures used for business purposes, and damage from animals or earthquakes might not be included. The good news is that you can often get more insurance to cover your cottage’s contents, additional buildings like sheds, boathouses, and even your recreational water toys added to your policy.

What are the types of cottage insurance and what do they cost?

When it comes to insuring your property, there are two kinds of coverage: secondary property insurance for those year-round spots and seasonal insurance for properties accessible during one or two seasons. The distinction – if your property has access throughout the year, it falls under secondary property insurance; if it’s not accessible in the winter, it’s classified as seasonal.

How much does cottage insurance cost?

Just like any property coverage, the price tag hinges on where you’re located and the value of your property. As a rough estimate, Canadians typically budget between $800 and $3,000 per year for this coverage.

However, the landscape is dotted with various risk factors that can sway the cost of your cottage insurance. Keep in mind, these factors can differ based on your region or the insurance company you choose. Let’s walk through some key elements that could influence your premium:

  • Access to emergency services (fire halls, hydrants, hospitals, etc.)
  • Special features like a hot tub, fireplace, wood stove or firepit
  • Road access (summer only, year-round, none)
  • Safeguards including fire alarms, carbon monoxide detectors, or a security system
  • The type of electrical wiring your cottage has
  • If you rent your cottage (and how frequently)
  • How long your cottage is unoccupied throughout the year

IMPORTANT: Fires are a common reason for cottage insurance claims, so your property’s heat source and access to fire services can influence your insurance rate. Also, whether you use your cottage throughout the year matters, as property monitoring and maintenance are expected. This often makes seasonal insurance a bit more expensive than coverage for secondary homes.

Renting or living at my cottage – does it change my insurance?

It’s important to inform your insurance provider if you plan to rent out your cottage to ensure complete coverage. Neglecting this could lead to your insurance policy being cancelled. You should also know that rental-focused policies usually prioritize liability coverage. But, your insurer will guide you on safeguarding valuables and highlight what might not require coverage so long as you take the time to ask the right questions along the way.

If your vacation property serves as an investment rental, commercial insurance is necessary instead of cottage insurance. A benefit of that insurance is that some financial institutions provide “revenue insurance” options to replace income if your property is uninhabitable for an extended period of time due to damage.

If you move to your cottage full-time (or plan to live there most of the year), it becomes your primary residence. This means your premiums could go up or down since you are changing your policy type.

Whether you’re renting your cottage, loaning it to friends and family, or using it as your personal retreat, I recommend an increase in your liability coverage from the standard $1 million to $2 million with a personal umbrella in case of a lawsuit. This will give you better protection at a minimal cost and always be sure before moving ahead with any insurance policy to read the fine print.

As with any type of insurance, it pays to shop around and get a second opinion if you’re unsure of anything. As a financial advisor, I can offer you advice about a variety of options for your vacation property insurance based on your investment, your mortgage, and your long-term goals. If you’re ready to explore your options or have any questions, give me a call at (705) 315-0516 or click here to book a consultation with me. Together we can secure the mortgage you need to buy your dream property, along with ensuring you have the right insurance policy in place so that you can kick back and relax right from day one.

× Close this modal popup