Owner-Occupied vs. Non-Owner-Occupied Insurance

Insurers charge higher rates for second homes that are unoccupied for much of the year.

Insurers charge higher rates for second homes that are unoccupied for much of the year.

Owner-occupied insurance costs less than non-owner occupied. This reflects the view of insurance companies that if you're the owner of a dwelling, you're going to take better care of it than a renter. Sometimes it's hard to tell what qualifies for owner-occupied insurance and what doesn't.


Insurers usually refer to insurance on a primary residence as "homeowners insurance." Whatever the name, it costs less to insure the house you live in than one you don't -- generally, about 20 to 30 percent less. If you live in the house year-round except for a couple of short vacations, clearly you qualify for homeowners insurance. In other common situations, it's unclear.

Non-Owner Qualified

Let's say you're lucky enough to be retired with enough money to travel for a year or two. You decide to lease your house while you're gone. You need to switch your policy from homeowners insurance to landlords insurance for the duration. You buy a vacation home. You don't rent it out to anyone else, but it's not your primary residence. The vacation home doesn't qualify for homeowners insurance. Instead you get another kind of non-owner-occupied insurance for second homes. It costs a little more, and can be slightly harder to get.

Landlords Insurance

The insurance coverage for homeowners and second home insurance is similar, differing primarily in rates. Landlords insurance comes in three varieties, DP-1, DP-2 and DP-3. DP-3 offers inclusive coverage similar to homeowners insurance. DP-1 and DP-2 exclude certain risks.

Second Home Gray Areas

Sometimes, it's not clear what kind of insurance a dwelling qualifies for. Some insurance companies won't insure a dwelling as a second home if it's not in a vacation area. Many companies won't insure a dwelling as a second home if it's less than 50 miles away from the primary residence. If you have a second home you rent out for nine months a year, you will likely need to buy landlords insurance. If you rent out the vacation home only occasionally, you should discuss the situation with your insurance agent.

Primary Residence Gray Areas

If you rent out a room in your primary residence, you should get an inexpensive "unit rented to others" attachment to the homeowners policy. If you live in an apartment over the garage and rent out the house, you may need a landlords policy. If you take long vacations -- let's say for an entire summer -- and rent out the house while you're gone, you may need a landlords policy. Discuss any gray areas with your insurance agent.

A Tip on Buying Insurance

Because landlords insurance and second home insurance is more difficult to get, get quotes from whoever insures your primary residence, automobile and business. They already know you, and they want to keep your business. When getting competitive quotes, it may help to bundle your insurance needs together. A company that may not insure a second home alone, may do so if other policies are included.


About the Author

Patrick Gleeson received a doctorate in 18th century English literature at the University of Washington. He served as a professor of English at the University of Victoria and was head of freshman English at San Francisco State University. Gleeson is the director of technical publications for McClarie Group and manages an investment fund. He is a Registered Investment Advisor.

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