Consider Homeowners' Insurance When Buying a Vacation Home

According to the National Association of Realtors (NAR.org), approximately 25 percent of vacation home owners are able to pay entirely with cash, while another 40 percent put at least half of the total cost down in cash. Since many of the people who buy vacation homes are financially stable, it is easy to overlook the issue of homeowners' insurance. Of course, this is a mistake.

When you don't research homeowners' insurance for your vacation home, you could wind up buying a house that will cost you a fortune over the long haul. Even if you pay cash for the property up front, insurance alone could run you up to $2,000 per year, and that's without any of the fancy bells and whistles or insuring of your valuables inside. This is especially important if you want to buy anywhere on the coast; after Katrina, insurance rates shot up.

In fact, many of the major insurance companies have pulled out of areas where hurricanes, tornadoes and other natural disasters might occur. Since vacation homes are often sought on the beach, this could present a real problem when you need to insure your home. Before you start calling real estate agents, you might be better served to call insurance companies first.

Ask About Premiums for Flood Damage

Even if you can find a reputable company to offer homeowners' insurance for your vacation home, you might be shocked at the amount of money you'll have to fork over to meet your premiums. Flood insurance, in particular, has seen a marked increase in the last year or so, which means you need to ask about it specifically. Any time you buy real estate near the water, flooding is going to be a concern.

In some cases, you can get discounts on homeowners' insurance for your vacation home if it is secured in some way against flood damage. For example, homes on stilts will often be less expensive to ensure. The same goes for homes built out of sturdy materials and homes set a certain distance from the water. Nevertheless, you won't find much relief in any coastal town.

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