Frequency of use vital for insurance
Some advice for owners of recreation properties, as well as for potential buyers:
From The Insurance Bureau of Canada at www. ibc.ca:
How the vacation property is used and how often it is occupied will dictate which insurance packages are appropriate for you.
How much time do you spend there? Do you use it year-round? Do you rent it out at some point during the year? The answers to these questions are important when you are considering what type of coverage to buy.
Most insurance companies will consider providing insurance for your vacation property only if you insure your primary residence with them as well.
You can have your vacation property listed on your home insurance as a secondary or seasonal location, or you can have insurance for the property as a separate, stand-alone policy.
Vacation property insurance is almost always provided as a “named perils” policy, instead of a comprehensive policy.
Named perils means you have insurance coverage for specific risks, such as fire, explosion or smoke damage. Coverage for certain risks, such as water damage or vandalism, may be more difficult or expensive to arrange, be-
cause of the part-time occupancy.
From RBC Royal Bank Canada at www. rbc.com:
There are three main financing alternatives for purchasing a vacation home:
A conventional mortgage allows you to finance up to 75 per cent of the purchase price of the home, thus requiring a down payment of at least 25 per cent.
An insured mortgage makes it possible to finance up to 95 per cent of the value of a second home.
If you happen to already own a cottage that has no debt on it, then you can also refinance that existing property for up to 90 per cent of its value and get an insured mortgage to purchase another vacation home.
A home equity line of credit makes use of the equity built up in your primary residence to let you borrow up to 75 per cent of the value of the home less the debt still owing on it.
You will need to have an up-todate appraisal done to determine the home’s current value.
From High Country Properties Management Ltd at www. highcountryproperties.com:
There are several ways to rent out your recreational property. If you buy a condo, it’s likely there will be an on-site rental program. Simply sign up, make a list of when the property is available for rent and you will receive a cheque, either monthly or quarterly, for revenue less expenses and a management fee.
You can also arrange for the services of an outside property management company that specializes in vacation rentals. Again, you will need to come up with a schedule of when you want to use your vacation home.
The management company will look after marketing your property, handling reservations and payment, providing linens, cleaning and maintenance, and send you a cheque for rental revenue, less expenses and a management fee, usually about 40 per cent.
You can do it yourself, but first you will need to make sure zoning bylaws allow short-term rentals in your area.
Then, arrange appropriate insurance and keep suitable accounting records.