If you are a vacation rental owner, cabin rental owner, or rental property owner, understanding the current trends in the insurance market is essential to managing and protecting your investment. The landscape in 2023 is shaped by a series of challenges and shifts that are important to consider when evaluating your insurance options. Here’s a detailed look at the trends and challenges facing the cabin and vacation rental insurance market today.
The Market Trends
We’ve all heard talk of inflations impact on our economy, and although it is down from a peak of 9% in mid-2022, its effects continue, including homeowner and vacation rental insurance markets. Elevated prices for building materials and construction labor have persisted along with the timeframes for that works completion. This adds up to make rebuilding or repairing properties a costly endeavor. For rental property owners, this means higher expected costs and the need for adequate insurance coverage to mitigate potential financial impacts.
Increased Costs Due to Natural Disasters
Natural disasters and severe weather have become a prominent concern in the cabin and vacation rental insurance market. In 2023 alone, there were 28 severe weather events with estimated costs ranging from $1 billion to $10.5 billion. Unfortunately, vacation and cabin rental properties are frequently in areas with higher risk for natural disasters because of the correlating natural beauty of those areas. Forests, mountains, and coasts are amazing, but can also be inherently risky. Rental property owners, particularly those in high-risk areas, should assess their policies to ensure sufficient protection against these increasingly common events.
Challenges in the Insurance Marketplace
Insurance companies’ willingness to provide property insurance remains low, especially in regions with a history of significant losses. This cautious stance has led many insurers to exit markets deemed too risky, leaving property owners with fewer options. Consequently, those remaining in the market may face increased premiums or restricted coverage terms.
Growth of the Excess & Surplus Insurance Market
With traditional insurers pulling back, the excess & surplus (E&S) insurance market has expanded to fill the gap. While E&S insurers can offer more specialized coverage options, they often come with higher rates and/or reduced coverage compared to standard insurance policies. Additionally, different regulations governing E&S insurance can complicate decision-making for property owners unfamiliar with these policies and their restrictions or language.
What Rental Property Owners Can Do
Given these trends and challenges, vacation and cabin rental owners should take proactive steps to safeguard their assets:
- Regularly Review Insurance Policies: Ensure that your coverage is up-to-date and accounts for current rebuilding costs and potential natural disaster risks.
- Explore Additional Coverage Options: Consider E&S policies if traditional insurance is unavailable, but be mindful of the potential trade-offs in terms of cost and coverage.
- Stay Informed About Market Changes: Keep abreast of news and developments in the insurance sector to anticipate and adapt to changes that may affect your coverage needs.
Talk with those that understand this market and can help guide you. Brandon Patterson and our experienced team can help you navigate the cabin and vacation rental insurance market. With knowledge, property owners can better position themselves to protect their investments and maintain financial resilience in the face of unforeseen events.
Reach out to Brandon today at brandon@ownbyinsurance.com for help with your coverage needs!