Vacation Home Insurance

Q: Hello there, Peter. We have rented a vacation home in Arizona for January and February. It will cost $3,000 per month. We're contractually committed. If we need to cancel (due to health, death, etc.), we have to pay up if they can't re-lease the place. The only coverage I want is protection against cancellation. ALL our other insurance costs are covered. Any suggestions? Thanks!

–Dan, Spring Green, Wis.

A: There are two things to be mindful of here: First, many all-purpose trip cancellation or interruption policies will reimburse any prepaid, nonrefundable expenses if you have to cancel. So if you can prove to the insurance company that your deposit was in fact prepaid and is nonrefundable (for instance, by providing a copy of the lease and a canceled check), you'll most likely get reimbursed for that expense.

Second, trip-cancellation or interruption policies generally don't let you cancel for any reason and still get reimbursed. Most policies will only reimburse you if you cancel for any unforeseen reason. For example, canceling because of illness or a death in the family is OK, but canceling just because you felt like going to Hawaii instead of Arizona is not.

The bottom line is to read the fine print and to call the insurance company offering the policy you intend to buy. Grill the sales agents on the specifics. Every company has slightly different rules and exclusions.To find out if you can get a policy that covers you only if you cancel the home rental, you'd have to call a few insurance companies. It's unlikely that you'll find one, but you never know. It doesn't hurt to ask.

You may have to buy an all-purpose policy instead, but these are generally very affordable, so I wouldn't balk at it if I were you.

One last word about insurance for vacation condos: Some companies, like TravelGuard, offer insurance that specifically covers you in the event of financial default on the property. This means that if the condo/timeshare is foreclosed on before you get there, but you've already paid the deposit, you'll be protected.

In the current economy, with sky-high default rates, this could be a very wise investment. But be aware that you generally have to purchase the insurance within 15 days of putting down the initial payment to be covered.