how much is cottage insurance

How Much is Cottage Insurance: Everything You Need to Know

Are you a proud owner of a cottage or a seasonal property? If so, it’s crucial to understand the ins and outs of cottage insurance. Whether you recently purchased your little slice of heaven or have been enjoying it for a while, having the right insurance coverage is essential to protect your investment and ensure peace of mind. We’ll delve into the world of cottage insurance and answer the burning question: how much is cottage insurance? We’ll explore various factors that can influence insurance premiums, provide valuable insights, and offer practical solutions to help you make informed decisions.


Location, Location, Location

Did you know that the distance from your cottage to a fire hydrant or fire hall, could affect your insurance premium?

One of the key factors that can significantly impact your cottage insurance premiums is the location of your property. Insurance companies take into account the distance of your cottage or vacation property from a fire hydrant, as well as the distance of the closest fire hall. The farther away you are from fire services, the greater the risk of loss in the event of a fire and, consequently, the higher your insurance premiums may be.


Building Materials and Heating Methods

When it comes to insuring your cottage, the type of building materials and heating methods used can also influence your insurance premiums. For instance, cottages with oil heating systems typically result in higher premiums due to the increased risk of oil leakage. On the other hand, gas, propane, or electric heating methods generally have lower insurance premiums as they pose less risk.

If your cottage has a wood-burning stove, it’s important to ensure that it is Wood Energy Technology Transfer (WETT) certified. Wood stoves used as the primary heating source can significantly impact insurance applications, as many insurers will only accept the property if you can provide the WETT certification.

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Additionally, log homes tend to be more expensive to insure compared to other types of construction materials. It’s simply because it’s a higher cost to repair log homes in the event of damage. The price of insurance is related to the estimated cost of rebuilding/replacing the dwelling.


Replacement Cost vs. Actual Cash Value

When choosing a cottage insurance policy, it’s crucial to consider the type of payout that would work best for your specific situation. Insurance policies can offer reimbursement for the replacement cost or the cash value of your cottage in the event of a total write-off.

The replacement cost refers to the amount it would cost to rebuild your cottage completely as it stood before the damage occurred. On the other hand, the actual cash value (aka ACV) represents the price your cottage would have been worth if it hadn’t been destroyed at that time (depreciation is applied to ACV).

The decision whether an insurer offers replacement cost and cash value coverage depends on various factors, such as the condition of your cottage, its location, and the year the property was built. For example, if you have a “bare-bones” hunting cottage in a remote location that was built in 1920, the insurer is more likely only to offer actual cash value. The premium for a replacement value policy would be higher due to the increased coverage it offers.


The Importance of Co-insurance

If you, as the insured, choose to undervalue the rebuild value of your property, the concept of co-insurance comes into play. This is a common practice among cottage and seasonal property owners who want to lower their insurance costs, as the premium is primarily based on the dwelling coverage limit. However, it is crucial to dispel a misconception before making this decision.

Many people believe that if they experience a loss, it won’t be a total loss, so there’s no need to insure the full value of their property. By insuring only a portion of the value, they can save money on their insurance while still being covered in case of a loss. Unfortunately, this belief is incorrect.

Most insurance policies contain a coinsurance clause. This clause requires policyholders (that’s you) to insure their homes, equipment, or buildings to at least a specific percentage of the total replacement cost value. Failure to do so will result in a reduced payout in the event of a claim. The specific percentage varies depending on the policy and the insurance company.


Applying Co-Insurance Example 1.0

cottage on fire graphicSuppose you own a charming lakeside cottage, and you decide to consult a contractor to determine the cost of replacing your building, which amounts to $200,000. Now, imagine that your insurance policy includes a 90% co-insurance clause. To comply with this clause, it is advisable to insure your property for a minimum limit of $180,000. For instance, let’s consider a scenario where a fire breaks out and causes damages worth $50,000 to a part of your cottage. If you have insured your property according to the co-insurance requirement, no penalty will be imposed on the settlement of your claim.

If your policy includes a 90% co-insurance clause, the insurance company will assess the amount of insurance coverage you have, the total replacement value of the building, and whether your policy limit meets the required 90% co-insurance $180,000 ($200,000 x 90%).

Since you’re underinsured, the insurance company is going to penalize your payout by applying the co-insurance formula to your loss. This means they take what you DID insure to, divide this by what you SHOULD have insured to, and multiply this factor by your loss.
($100,000 / $200,000) x $50,000 = $25,000 would be the amount you get paid out.


Applying Co-Insurance Example 2.0

Let’s walk through an example scenario to illustrate the importance of cottage insurance and the factors that can influence its cost. Imagine you’ve recently purchased a seasonal cabin property in a picturesque remote location. The cabin itself is a cozy retreat you bought for $50,000. However, due to its remote location, the cost of rebuilding the cabin in the event of a total loss would be significantly higher than its sale value.

In this case, the replacement cost, including the extra expenses associated with debris removal, transporting materials to the remote location, labour, and the cost of materials, could amount to $125,000.

However, the premium associated with insuring the $125,000 is a little out of your budget. Your insurer has an 80% co-insurance clause, which allows you to underinsure the property limit of $100,000 to avoid a penalty of coverage.



Understanding the factors that influence cottage insurance premiums, such as location, building materials, and heating methods, can help you make informed decisions when selecting a policy. Additionally, considering the type of payout you prefer and implementing a good maintenance plan can further safeguard your property and potentially lower your insurance premiums.

Remember, each cottage is unique, and it’s important to consult with an insurance advisor to tailor your coverage to your specific needs. Doing so lets you enjoy your little slice of heaven with peace of mind, knowing that you have the right insurance protection in place.

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