Second-Home Owners: Don’t Let Liability Spoil Your Serenity
Whether it’s a lake house, a ski chalet or a beachside villa, a vacation home can be a special place to create cherished family memories, enjoy the outdoors and entertain with ease. But alongside relaxation comes a set of risks that can threaten your financial security.
While your homeowners insurance policy typically covers you against physical property damage, an accident at your home could leave you liable for medical bills or facing lawsuits that far exceed the policy’s protections. The good news? With a few thoughtful precautions, you can dramatically reduce your risk exposure. Here are six important steps to consider:
- Structure ownership strategically. How you legally own the vacation home matters greatly. For example, ownership may be in your name, shared with a family member or business partner, or held in a Limited Liability Corporation (LLC). Each structure comes with pros and cons when it comes to liability protection, taxes and estate planning, so it’s best to consult your attorney and financial advisor before making decisions.
- Get umbrella insurance. This policy provides liability protection above and beyond the limits of your homeowners, auto or watercraft policies. In the event of a major claim, an umbrella policy can cover legal fees and damages that might otherwise require liquidating investments and jeopardizing long-term financial plans.
- Review employment liability coverage. Although it’s optional in Texas, some states require worker’s compensation insurance. If you employ people at your vacation home, such as caretakers, gardeners or housekeepers, it’s worth reviewing your responsibilities and protections.
- Make your property safer. You should also take practical steps to prevent accidents at your vacation home. These might include installing a monitored alarm system, fencing off your pool or hot tub, adding handrails along staircases and properly securing all recreational vehicles and dangerous equipment.
- Hire a management company. If you don’t live near your second home, investing in professional oversight can be well worth the peace of mind. A property manager can help you maintain a visible presence at the property and keep safety standards in check.
- Know the rules for short-term rentals (STR): Insurance rules change if you rent your vacation home to guests through platforms like Airbnb and VRBO. You may need a special short-term rental policy, which covers various risks not covered by standard homeowners insurance.
Understanding your risks and taking steps to mitigate them won’t just protect your finances; it can give you the peace of mind you need to fully enjoy your retreat. Reach out to Chelsea James at 817.420.5741 or CJames@frostinsurance.com for a detailed assessment.
Insurance products are offered through Frost Insurance for solicitation in the state of Texas and are noninsured by the FDIC or any other Federal Government Agency; are not a deposit, obligation or guaranteed by Frost Bank; and may lose value.