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Insuring second homes in a growing second home market

Owning a vacation home is now more popular than ever, and in a world where remote or hybrid work is becoming the norm for some, insuring those homes often comes with new considerations. Starting in 2020, when people fled densely populated urban cities like New York, there was a considerable increase in the number of people purchasing insurance for their secondary dwellings, according to ISO data.

Insuring second homes in a growing second home market

With the rise of remote work, people now have more flexibility when it comes to where they want to purchase their primary dwellings.

A combination of pandemic savings, a white-hot real estate market and a remote work revolution, along with historically low mortgage rates, may have made owning—and insuring—a second home a possibility for some.

As the American lifestyle continues to change, insurers may want to remain aware of these changes so they can respond to their customers with the most up-to-date coverage.

Inside the rapidly expanding vacation homes market

In 2020, the U.S. housing market overall gained more value in one year than it had since 2005, as buyers competed in all cash sales, pushing homes to sell faster than they ever had.1 Vacation homes also sold much faster during the pandemic, spending on average 13 less days on the market before selling.2

This growth came at a time when people were spending more time at home than ever before, going to work from their kitchens, attending school from their bedrooms, and staying away from making many trips out of the home. All this time spent at home may have inspired some to perform home renovations, and others to purchase secondary dwellings, either to use as rental properties or as a way to get out of the city.3

According to data supplied by companies that report to ISO, in 2020, purchases of fire insurance for secondary dwellings increased 4.3% from 2019, measured in house years, and purchases of extended coverage insurance for second homes increased 5.1% from the previous year.

Location, location, location

According to the National Association of Realtors, vacation home sales spiked during the pandemic, up 16.3% from 2019 to 2020, while home sales growth overall was only up 5.6% in 2020.4 But, according to Verisk data,these homes were not generally purchased in or near cities, but rather in more remote states like Arizona, Washington, Nevada, Delaware, Utah, Vermont and Pennsylvania—the places that also showed an increase in the purchase of dwelling insurance for seasonal dwellings in 2020, according to ISO data.

Other popular places for vacation homes included North Carolina, Missouri, and Maryland, according to the National Association of Realtors.5 This may be because more Americans were craving a more remote or suburban lifestyle after the pandemic, or because remote work allowed people to move to places with lower costs of living than cities.6 7 Whatever the case, it may have made insuring these second homes more common.

Considerations when insuring second homes

Insurers asked to insure second homes may want to consider the following:

  • Type of insurance. Insuring second homes involves insuring the property itself against damage and getting liability insurance in case someone gets injured on your property. To help address both property and liability exposures, you may want to consider offering a personal liability policy with a dwelling policy for the secondary home, or you may allow the extension of their homeowners liability insurance to that vacation home.
  • Location. ISO data shows more Americans purchasing policies in more remote areas, which may cost significantly more to insure, as actuaries consider how quickly help could come in an emergency. If, for example, a home is not close to a fire hydrant or fire department, the price of insurance will likely be higher than a home that is. These remote dwellings may also have additional peril risks. If it’s in the woods, it could be a wildfire risk. If it’s near the beach, there could be increased exposure to wind and hurricanes, and perhaps require an additional purchase of flood insurance.
  • Occupancy. When insuring second homes, underwriters often consider how many months a year the house will remain unoccupied, allowing for the possibility of damage that could go undiscovered for a while, potentially resulting in a claim with higher severity. For example, if the home is in hurricane territory, and no one is around to board up windows or put away patio furniture, the damage to that home may be higher than expected. But with the hybrid work revolution, many may be splitting their time between their vacation home and their primary home, as opposed to just seasonally visiting the vacation home, so the overall exposure for that vacation home may be lower.8 And if the secondary dwelling should be used as a rental, it is important that it is correctly classified.

While the cost to insure secondary dwellings may not have changed significantly from 2019, with the rise of remote work, people now have more flexibility when it comes to where they want to purchase their primary dwellings, and may be attracted to areas where the cost of living is lower. These people may then be able to more easily afford buying, and insuring, secondary homes. Some analysts say that vacation homes, along with dwelling insurance, will likely continue to sell.9 10

Learn how these additional risk exposure can impact your personal property book.


Angela M. Cuonzo

Angela M. Cuonzo is an actuarial director for Personal Lines Actuarial Products at Verisk. She can be reached at Angela.Cuonzo@Verisk.com.

William C. Schlager

William C. Schlager is director of personal property and farm product development, Underwriting Solutions at Verisk. He can be reached at William.Schlager@Verisk.com.


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  1. Treh Manhertz, “The U.S. Housing Market Gained More Value in 2020 than in any Year Since 2005,” Zillow, January 26, 2021, < https://www.zillow.com/research/zillow-total-housing-value-2020-28704/>, accessed on January 6, 2022.
  2. Scholastica Cororaton, “Vacation Home Sales Surges During Pandemic,” National Association of Realtors, June 15, 2021, < https://www.nar.realtor/blogs/economists-outlook/vacation-home-sales-surges-during-pandemic/>, accessed on January 6, 2022.
  3. Scholastica Cororaton, “Five Housing Trends in a Pandemic Year,” National Association of Realtors, January 27, 2021, <https://www.nar.realtor/blogs/economists-outlook/five-housing-trends-in-a-pandemic-year/>, accessed on January 6, 2022.
  4. Scholastica Cororaton, “Five Housing Trends in a Pandemic Year,” National Association of Realtors, January 27, 2021, <https://www.nar.realtor/blogs/economists-outlook/five-housing-trends-in-a-pandemic-year/>, accessed on January 6, 2022.
  5. Scholastica Cororaton, “Vacation Home Sales Surges During Pandemic,” National Association of Realtors, June 15, 2021, < https://www.nar.realtor/blogs/economists-outlook/vacation-home-sales-surges-during-pandemic/>, accessed on January 6, 2022.
  6. Ayanna Gill, Claire Pederson, Allie Yang, “Remote workers spur housing boom in smaller US cities, drive up prices,” ABC News, September 14, 2021, < https://abcnews.go.com/US/remote-workers-spur-housing-boom-smaller-us-cities/>, accessed on January 12, 2022.
  7. Katie Tsai, “More Americans are looking to move as remote work gains acceptance during Covid pandemic,” CNBC, February 22, 2021, < https://www.cnbc.com/2021/02/22/more-americans-are-looking-to-move-this-year-as-remote-work-takes-hold.html>, accessed on January 12, 2022.
  8. Martha C. White, “Already Stretching to Buy a Vacation Home? Insurance May Add to The Sticker Shock,” Money, April 28, 2021, <https://money.com/homeowners-insurance-vacation-home/>, accessed on January 6, 2022.
  9. Claire Ballentine, Alice Kantor, “Why Buying a Second or Even Third Home Is Becoming More Popular Than Ever,” Bloomberg, October 15, 2021, <https://www.bloomberg.com/news/features/2021-10-15/why-buying-a-second-home-is-real-estate-s-newest-trend/>, accessed on January 6, 2022.
  10. “Demand for Vacation Homes Up 77% From Pre-Pandemic in December,” Market Screener, January 6, 2022, <https://www.marketscreener.com/quote/stock/REDFIN-CORPORATION-37247408/news/Demand-for-Vacation-Homes-Up-77-From-Pre-Pandemic-in-December-37480130/>, accessed on January 6, 2022.

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