Tips for Insuring a Second Home or Vacation Property Overseas
If you’re like a lot of people nowadays, you don’t have just one home.
You bought a vacation home in another country to get away from it all, or you’re constantly looking up the property market near Blairsville or watching the prices of villas in Bali.
But, there may be insurance issues that arise from having a property located outside of your domicile. Here’s how to sort them out.
Research The Local Laws and Regulations
Ideally, before you buy, you would research the local laws and regulations to check for any strange or unusual regulations that might make it difficult for you to own property and insure it in another country.
A country might have laws, for example, that make it cheaper or more expensive for foreigners to own land or insure property, or insurers may not insure property unless you maintain it or live in it for a minimum amount of time during the year.
In Europe and the Caribbean, for example, your insurance carrier must be domestic, so it will be more difficult for you to insure your home there unless you’re willing and able to pick up a national insurer in that country or area. So, if you’ve purchased a home in the UK, you might need to pick up a company like Lloyd’s of London.
Be aware that insurance companies will offer you a policy that doesn’t comply with local laws. What happens if you need to file a claim? Will they pay? What if there’s a dispute on the adjustment? These are things you want sorted out before you buy insurance and definitely before you have to file a claim.
Ask Your Real Estate Broker For Referrals
Your real estate agent might be the best guide you have when it comes to finding reliable and affordable insurance. They’re already on your side after the sale because they want your loyalty for future business and referrals (being a real estate agent is a tough business, and referrals are almost necessary in that industry). They also know the local insurance laws.
Failing that, guides, like this homeowner guide can help you find the right insurance for the property, not just ordinary insurance for the home. You might need contents cover, buildings insurance, and life cover (for the mortgage).
While your real estate broker should be your first point of contact, don’t hesitate to ask for referrals to other professionals. A real estate broker likely works with an insurance agent, a lawyer, and other professionals, like lenders.
So, you might have to go multiple referrals “deep.” In other words, your real estate broker might refer to you his preferred lender who might, in turn, refer you to his insurance agent.
Understand The Insurance and Reinsurance Market
When you live in a country other than the one where your home is being insured, make sure you understand any differences between your home country’s insurance market and the foreign one. Overseas contracts can differ by a wide margin and they’re not standardized.
You really do have to analyze the contract, find out how much you’re paying, and figure out whether you’re getting a good deal for the premium.
For life cover, you should consider working with an agent that understands how to properly assess cost per thousand and, for whole life and universal life cover, how to reverse engineer life insurance so that the costs embedded can be known.
Finally, watch out for limitations and exclusions. These are in every policy, and insurers will want to make use of them to protect their interests. For example, and insurer may want to know how often you’ll be living in the residence that they’re insuring and who will be the caretaker when you’re in your home country.
If you’re not living in the insured foreign home, and there’s no one watching the place and keeping it up, the insurer may not cover you if something happens. Some policies are really restrictive, outlining a mandatory month-to-month residency. In other words, if the residence is unoccupied for more than 30 days, the policy coverage will become void.
Insurers also see property theft as a major risk. Check with the foreign insurer as well as your domestic one to see whether you need additional personal property coverage. It’s entirely likely that your domestic policy covers you.
At the end of the day, your goal is to tailor coverage for your specific needs. You should not have too much, nor too little. If you have the option, choose replacement cost over cash value of your property, and always have a lawyer look over any contract you don’t understand.
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Lucas Coleman is a real estate agent. He loves to share his insights online. His articles can be found on many real estate and financial websites.