A guide to cottage insurance

Whether you’re a weekend cottager or a full-time summer resident, you’ll need cottage insurance. Here’s an overview of cottage insurance, tips and other important information, including what you need to know if you have guests or renters coming to town.

What is cottage insurance?

Cottage insurance is exactly what it sounds like—property insurance that’s similar to your home insurance but designed for your cottage. Most lenders require home owners to show proof of insurance on a property in order to get a mortgage.

According to the Insurance Bureau of Canada (IBC), most companies will only offer you cottage insurance if they also insure your primary residence. A cottage insurance policy is added to your home insurance as coverage for either a secondary or seasonal location. It is possible to get a separate, stand-alone cottage insurance policy, but this is less common.

What types of cottage insurance are out there?

Secondary property insurance is standard for a property that can be used year-round, whereas seasonal insurance covers a property that’s used for one or two seasons annually, explains Kelly Feteira of Morison Insurance, a brokerage with locations across southern Ontario. So, a cottage you visit most weekends in the summer and have access to in the winter would be a secondary property, but a cabin you can only access certain months of the year would be seasonal.

It’s best to confirm these details with your insurance provider, as terms like “cottage insurance,” “seasonal home insurance” and “secondary property insurance” may be applied somewhat differently between financial institutions. Like most insurance on the market, you can choose the level of coverage that’s right for you.

What does cottage insurance cover?

A cottage insurance policy will typically cover damage to the structure and/or property, plus personal liability in case a guest is injured while on your property. This means that if there’s a fire or someone falls off the deck, breaks their leg and sues you, you’ll be covered to the extent outlined in your policy. You can choose comprehensive coverage or take an á la carte approach. It’s also important to understand whether you have insurance that covers the cash value of the property or the replacement cost of the property (the latter being ideal), and if your policy covers the cost of rebuilding to code. This can be a huge expense, if you’re replacing a decades-old structure after a flood or fire, for example.

So, what’s not covered? Depending on your policy, your cottage insurance may exclude septic bed backups, motorized vehicles, buildings used for business or farming purposes, and damage caused by animals or earthquakes. That said, you can often purchase additional insurance to protect the contents of your cottage, outbuildings like boathouses or sheds, and recreational watercraft. Here’s a detailed look at standard coverage options from the IBC.

How much is cottage insurance?

The exact cost of your cottage insurance policy will depend on your location and the value of your property, but generally speaking, Canadians can expect to pay between $800 and $3,000 annually, Feteira says.

What other factors impact the cost of cottage insurance?

There are a lot of different risk factors that may impact the cost of your cottage insurance, and some of these vary by region and/or insurance company. Here are some things your insurer may assess:

• Access to services such as fire halls, fire hydrants, hospitals and emergency medical services
• Specific cottage features such as hot tubs and pools, fireplaces, wood stoves and firepits
• The type of road access your cottage has (summer only, year-round, none)
• If you have fire alarms, carbon monoxide detectors, a security system, etc.
• The type of electrical wiring (knob-and-tube is a red flag to insurers, Feteira says)
• If you rent out your cottage (and how frequently/for how long)
• How often your cottage is unoccupied

Fires are a common reason for making a cottage insurance claim, so your property’s heat source and access to fire services will have a significant impact on your insurance rate. Occupancy throughout the year is another key factor, as cottage owners are expected to check on their property and perform preventative maintenance as required.

“Say you shut the water off and there’s no road access to that cottage. Are you going to [travel up there] and take the snow off the roof or make sure no rodents have gotten in there?” Feteira explains. “A seasonal property is essentially sitting unoccupied for a couple of months, whereas with a secondary property, you have access all year round and will typically visit on a weekly or bi-weekly basis.”

Because of this, seasonal insurance is often slightly more expensive than secondary home insurance.

What happens if I rent out my cottage?

It’s important to let your provider know if you’ll be renting out the cottage in order to ensure you’re fully covered. In fact, failing to do so could actually result in the termination of your cottage insurance policy. With renter-specific policies, the coverage will typically have an emphasis on liability. Your insurer will also make sure that all valuables are financially protected (for example, a brand-new deck with glass panels or fancy new appliances) and let you know what doesn’t necessarily need coverage (like that dated interior furniture you’ve been meaning to upgrade).

If you rent out the property a lot, you may want to consider commercial insurance instead of cottage insurance. Some financial institutions also offer “revenue insurance” for these scenarios. Think of it this way: renting out a cottage essentially turns your vacation home into a business, and your insurance coverage should reflect this. (Read more about insurance and short-term rentals.)

Am I covered by the owner’s cottage insurance if I’m staying at a rental cottage?

If the cottage owner has the right insurance in place, yes—you should be covered in case of damage, injury or loss of life, Feteira confirms. However, you can also choose to purchase travel insurance to ensure you’re adequately covered.

What happens to my cottage insurance if I start living at the cottage?

If you move to your cottage full-time (or for most of the year), making it your primary residence, your insurance will be impacted. That means your premiums could go up or down—the only guarantee is that they will be impacted, at a minimum by a change in policy type. We recommend speaking to your insurance provider before making the decision to change your primary residence (or as soon as this decision has been made).

How has COVID-19 impacted cottage insurance rates?

Despite an increase in many types of insurance claims throughout the pandemic, cottage insurance rates haven’t been significantly impacted. However, if you buy a cottage as an investment property, you may end up paying more than you anticipated.

“It’s not that premiums have gone up—it’s that what people are using their cottages for has changed,” Feteira says, explaining that a cottage that’s rented out on Airbnb is harder to insure than one your family uses privately. “If you have over 180 days of rentals on that cottage, you need to go to another [insurance] market. The insurance rate on a family cottage doesn’t fluctuate as much, especially if you’ve bundled it with your home and auto.”

More cottage insurance tips

Feteira recommends that all cottage owners increase their liability coverage from the standard $1 million to $2 million with a personal umbrella due to lawsuits being on the rise. “This offers better protection, and the cost difference is often around $40 per year. That’s a lot less than paying for a lawyer.”

As with any type of insurance, it pays to shop around. Speak to your current provider about cottage insurance options, but don’t be afraid to get a second, third or fourth opinion. Or, connect with an insurance broker to review a variety of options from different sources. Some cottage owners choose to move all of their insurance to a new provider to get the right coverage at the right price. In the end, you’ll be glad you did your research and got the insurance you need so you can relax all summer (or all year) long.

About Erin Pepler

Erin Pepler is a freelance writer based in the Toronto area. A frequent contributor to MoneySense, she is also the author of Send Me Into The Woods Alone: Essays on Motherhood.