Cottage owners who assume their seasonal property is insured the way their house is are often wrong in three specific ways, and the differences tend to surface only when a claim is filed, according to Katie Young (pictured), a sales broker at Mitch Insurance.
The first gap is the one Young considers most consequential: cottages rarely qualify for guaranteed replacement cost, the coverage that rebuilds a home after a total loss no matter what the rebuild ends up costing. "This is a coverage found on most homeowners policies which rebuilds a home in a total loss scenario until it's complete," Young said. Cottages, by contrast, are usually written on a replacement-cost basis that caps the payout at a set dollar figure.
The reason, she said, is that cottages often cannot meet the conditions insurers attach to the broader coverage. Age, location and original construction all weigh against them.
"For example, things like electrical or plumbing may not be to code, therefore the companies won't offer that guaranteed replacement cost," Young said.
That makes getting the dollar figure right the single most important thing an owner can do. "This in particular makes it more important on a cottage to ensure it's getting the highest rebuild amount possible," she said, "and that's done by making sure all the accurate details are being included when determining that amount."
When a capped policy is tested by a real loss, Young said, the insurer works within the figure on the policy rather than whatever the rebuild truly costs – which means the client may not have the coverage to rebuild the cottage as it was. That is precisely why the limit has to be set generously from the outset, she said, and why both the owner and the broker share responsibility for getting it right.
The second gap is in how the policy defines what is covered at all. Home policies are typically written on a comprehensive, all-risk basis, covering everything except a list of stated exclusions. Cottages are frequently written the opposite way.
"They also could tend to be on a different form, which is normally named perils," Young said, "which basically means that they name all the perils that would be covered, and if it's not listed, it's not covered."
On a homeowner's policy, she said, the exclusions vary somewhat between insurers but tend to be broadly similar – whereas a named-perils form covers only what it explicitly lists, leaving more room for an uncovered loss.
The third gap is water, and it is the one most shaped by where cottages sit. Coverages that are routine on a home policy – sewer backup, and overland water that enters through windows and door jambs after coming across the land – are often missing or capped on a cottage. Young was careful to separate this from plumbing failures; overland water is surface water, not a burst pipe.
"It's for when water comes over the land and into your home through windows and door jambs," she said. "It's not usually included on a cottage, or the companies will limit that coverage to a dollar value."
The driver is proximity to water, she said – the feature that defines a cottage is also what makes insurers wary of the flood exposure.
"Cottages obviously tend to be located near a large body of water, really any body of water, or in a high-risk flood area," Young said. "Because of that, again, the companies will either not offer it or put a dollar value limit on it." The picture is not absolute, she added: a four-season cottage set back from the water may still be offered those coverages.
For Young, the common thread across all three gaps is that owners do not discover them on their own – they assume parity with their home policy until a loss proves otherwise, which puts the responsibility on the broker to surface what is missing before it matters.
"If a broker is not telling the client about them, or they're not already aware, they're not necessarily going to ask," Young said. "As a consumer, it’s really important to be asking all the right questions as well."
