Decoding Higher Rates: A Guide for Seasonal and Investment Properties

A question that our agency heard today, "Why is the rate for this dwelling higher than the home I currently live in which  is worth much more.
Seasonal and rental property insurance rates can be influenced by several factors. Let’s explore some of the key reasons why these rates tend to be higher:​

1. Location. The geographical area where your property is situated plays a significant role. Here are some location-related factors:  ​​​
   
   1. ​Distance from fire department and water hydrant are rating factors.
   2. Urban vs Rural- Urban areas may have higher crime rates, including theft and vandalism, leading to more insurance claims. Additionally, large cities tend to have higher real estate values, which impact construction costs for repairs.
   3. Regional Weather Patterns- Areas with specific weather patterns may experience more significant claims.
2. Rebuild or Replacement Cost. Insurance providers consider the rebuild or replacement cost of your property. Replacement cost refers to the amount needed to rebuild the same house from scratch, while market value includes other factors like land value and neighborhood appeal. It is important to have an insurance professional review the coverage to avoid overestimating or underestimating as this can effect immediate cost or have negative consequences in the event of a future claim.
3. Age and Condition of the Property. 
   
   1. Older Properties: Older homes may have features that don’t meet modern building standards, leading to higher insurance rates. Updating these features can help reduce premiums as discounts may be available for updated systems or a replaced roof.
      
   2. Vacation and Secondary Homes:  The insurance cost for a secondary home is often higher since the owner is not always living there. Having someone occupy the home helps to protect it against risks and deters burglars.
4. Risk Exposure. Properties in areas with rapid economic growth, vacation spots, or retirement destinations face unique challenges. Secondary homes and investment dwellings may take longer before discovery of a claim so the cost paid out will be higher.
5. Bundle vs Package. A primary home will sometimes have more discounts available and is traditionally a more bundled policy. It has been designed to bundle the coverages that a majority of consumers would want resulting in a lower price overall since those coverages are always written. A seasonal or investment dwelling is more of a package policy because there are many more variables as to what is needed so a larger amount of coverage or endorsements are individually selected. Since less are chosen the individual cost is higher.
   

Remember that insurance rates are influenced by a combination of these factors, and each provider may use different criteria to calculate premiums. If you have specific concerns about your seasonal or rental property insurance, consider discussing them with your insurance agent.