Cottage Insurance

Last week, I wrote about liability around the cottage and during summer activities.  This week, I want to remind you of the insurance issues that also come up.

How would you like to go to the cottage for your vacation and then come home to find that your basement is flooded from a burst fitting on your dishwasher?  To top it off, your insurance company may deny you coverage because you left the home for an extended period of time without making sure that someone checked on the house every few days. 

Before you go away, check your policy or call your broker to see how long you are allowed to leave the house untended.  If necessary, arrange with a neighbour or friend to drop by and check on the house.

If you have a boat, make sure that you are insured for liability.  Period.

If you have a cottage, look into insurance.  You need to recognise that many cottage policies do not cover vandalism (or you may have to pay a lot more for it).  If your cottage is more of a traditional “camp”, in that it is furnished with the hand-me-downs from friends and family, you may even want to drop coverage for theft.  Be prepared to pay a lot for fire coverage.  If your cottage is water access only, you will pay a LOT for fire coverage, as the local fire department likely does not have fire boats waiting nearby.

Cottage policies are often not as comprehensive as home polices.  Some are “all risks”, which means that they cover whatever is not specifically excluded.  Other policies are “named risks”, which means that they only cover the risks specifically named.

Your home policy is usually or “replacement value”, meaning that the insurance company will pay to replace the house and contents, up to the policy limits.  Cottage policies are often “actual cash value”, which means that they only pay what your cottage and contents are actually worth. 

As for your contents, used furniture is virtually worthless.  Regarding the cottage, the value of the building is often much less than the replacement value.  Your cottage property might worth $250,000, but the lot alone might be worth $125,000.  That means that the building is only worth $125,000.  If it costs you twice that to rebuild, then you are underinsured. 

It’s no secret that I generally don’t like insurance.  However, I like even less the thought of losing my cottage to fire and not having enough money to rebuild.  Make sure that you have adequate, replacement cost coverage for the major risks like fire. 

It’s OK not to have vandalism or theft coverage, as long as you are prepared to absorb the loss if one was to occur.  If you are not prepared to do so, you might want to pay an additional few hundred bucks to get the coverage that you want.