Insuring lakefront homes

© Liliia Kanunnikova | Dreamstime.com

By Mike Scott

Home insurance can be complex for lakefront property owners, with insurance agents recommending these homeowners have the necessary amount of insurance to provide significant financial protection against a catastrophic event like structure fire or serious personal injury.

This can include policies, language and other details specific to lakefront considerations from boats and boat houses to hoists and flooding. Lakefront property owners have higher risks and therefore more opportunities for claims that the average homeowner simply because of the complexities created by bordering water.

­­“My company likes me to put eyes on the properties we cover,” said Farm Bureau Insurance Agency Owner Doug Brown, who has offices in Commerce Township and Canton. “We want to make sure that (portfolio clients) are consistent with the types of properties we want to cover and that we have a complete picture of (risks).

“You want to (confirm) with your agent details about your property,” Brown said. “They might be able to identify issues that may not be covered.”

Such coverage extends beyond a standard homeowners’ policy, said Josh Stanford, executive vice president and agent with insurance brokerage HUB International. It often includes additional insurance policies for boats, floods and other issues. Most clients may not understand all the options available to them, and what their homeowners’ policy does and does not cover.

“I have these conversations all the time,” Stanford said. “It’s not the job of (clients) to understand insurance but they should know what’s in their policy. That’s where working with an agent can help.”

Boat insurance is important because if a property owner requires a claim on a watercraft and doesn’t have a specific boat policy, that can become a claim on their homeowners policy. Such a claim can cost the property owner much more money in the long run because it likely would result in higher renewal rates for the next three to five years on their standard policy. Having the claim on a separate boat policy would probably cost clients less long-term.

“You don’t want to turn a small boat claim into something that sits on your (homeowners’ insurance) profile for the next few years,” Stanford said. “The cost of the boat policy is minimal. You want to separate that liability.” He estimated that a boat-related claim on a homeowners’ policy can extend rates by well over 15 percent what they would otherwise be on an annual basis.

Boat insurance is recommended for any watercraft with an engine or anything beyond a kayak, rowboat and canoe, Brown said. Farm Bureau Insurance and many other carriers offer boat insurance as part of a standard lakefront homeowners policy that can include a level of blanket coverage around $20,000. That blanket coverage can pay for repairs to non-motorized boats like a kayak as well.

“I never met anyone on a lake that didn’t have a boat within six months (of moving in),” Brown said. “If you don’t have coverage for your boat, you could be on your own, paying out of pocket if you need repairs.”

Boat coverage is especially important on jet skis because of the large amount of liability on them, and the higher rate of danger than comes with operating jet skis.

“You can have teenagers and (young adults) driving them at high speeds. I’ve worked with clients who have dealt with terrible tragedies with jet skis,”said Brown.

Flood insurance is another specialized option recommended by agents like Stanford and Brown. As northern Michigan residents have been reminded this spring, flood coverage can pay for defined flood incidents, such as the damage experienced by homeowners around the Edenville Dam in Gladwin caused by recent snow melt and heavy rains.

Stanford cautions against homeowners believing that “it can’t happen in Oakland County” either. He has conducted his own research and discovered that there are more than 150 dams in Oakland County alone. Some of them may have issues caused by aging infrastructure. Failure of any dams can lead to flooding issues ranging from standing water in basements to completely flooded yards, seepage and more.

“Many dams around Michigan are sagging and may be deteriorating,” Stanford said. “Some (lakefront) property owners may not even realize their lake is connected by a dam.”

The Holly Dam in northern Oakland County has recently experienced issues including significant flooding along North Holly Road in Holly, with some areas reportedly covered by two feet or more of water, according to media reports. Multiple roads were closed and emergency crews responded to stranded motorists. Vhay Lake, a private lake near a border of Bloomfield Township and Troy, had downstream seepage caused by an active dam failure.

Lake levels adjust based on rainfall, and flooding is often a “hot” topic with clients in the spring, Stanford said.

“You don’t want to have the conversation about flood insurance when the floods are (imminent),” Stanford said. “It’s vital if you live on water.”

Flood insurance is available through the National Flood Insurance Program (NFIP), which federal program created to provide flood insurance to property owners, renters and businesses in communities that participate in the program.

The NFIP was established by Congress in 1968 and is administered by the Federal Emergency Management Agency. The program was created because standard homeowners insurance policies generally do not cover flood damage. The NFIP helps property owners recover financially after floods while also encouraging communities to adopt floodplain management and building standards designed to reduce future flood risks.

NFIP insurance though for residents is capped at $250,000 for damage to the structure of a single-family home and at $100,000 for personal contents inside the home, Stanford said. There are many options available in the private market that can provide enough coverage for the current replacement value of a home if catastrophic flooding were to occur.

NFIP remains an option for homeowners, but every situation is different.

Liability coverage, also known as an umbrella policy, is extra liability insurance that provides additional financial protection beyond the limits of a homeowner’s, auto or other primary insurance policies. For residents, an umbrella policy is designed to help protect assets and future income if they are found legally responsible for injuries, property damage or certain lawsuits that exceed the limits of their standard insurance coverage.

Stanford said it is common for him to work with new clients who have lakefront property that has little or no liability coverage, putting them at extremely high financial risk.

“At the bare minimum (you want to have) coverage up to the insured’s net worth,” Stanford said. In other words, homeowners should provide a realistic estimate of their net worth and ensure that homeowners plus umbrella coverage is up to that level.

Stanford estimates that lakefront property owners may have liability risks that are 10 to 20 times higher than homeowners bordering dry land. That’s because there are many additional threats around a lake, such as deck collapses, slips and falls, lake accidents, dock diving, swimming and more. Lakefront property owners also generally host more events, often with alcoholic beverages, that can lead to issues.

For example, if a person attends a party at someone’s home, consumes alcohol, and gets in an accident seriously injuring another driver on the way home, the party host may be liable for some of the healthcare costs endured by the injured party.

“I’ve seen (the plaintiff) come after future earnings and tap into future wages of a (lakefront homeowner) to satisfy a judgment if you don’t have enough insurance coverage,” Stanford said.

Typically, the younger homeowners(s) are, or the more children they have living at home, the higher risk they are, especially on a lakefront home as well.

Furthermore, coverage with a liability policy “travels with) the insured parties, Stanford said. So, if they are renting a boat on a trip or in a foreign country, that policy can help protect their finances against unplanned emergencies. Such coverage is not possible under a homeowners’ policy.

Other popular lakefront property owner “toys” like a golf cart can be covered under an umbrella policy, but some insurance carriers offer golf cart liability through a base policy, even if it is not scheduled, Brown said. Policy wording for coverage of such specialized items as a golf cart should be closely scrutinized because some policies will restrict golf cart usage to a specific neighborhood or streets. Regardless, use of a golf cart is a topic that clients should share with their insurance agent, Brown said.

Another common insured item is boat hoists. Endorsements are not always readily available for boat hoists, which can limit coverage if a boat is damaged while on a hoist over the winter, Brown said.

“I’ve had boats that lost their canvas tops from a storm while on a hoist,” Brown said. “Those canvas tops are expensive and may not get covered without coverage or (inclusion with a) standard homeowners policy.”

Other insurance topics that homeowners should be aware of include extended replacement costs. The topic of replacement costs is relevant because of how expensive building materials have become. During the COVID-19 pandemic, the cost of building materials rose dramatically across the United States, creating major challenges for contractors, homeowners, developers and local governments. Supply-chain disruptions, factory shutdowns, labor shortages, transportation delays and a surge in home renovation and construction activity all combined to push prices sharply higher.

The more building materials, the more expensive it is to fully replace the cost of a home following a catastrophic event. Some insurance policies may not cover the full, current replacement value.

“You want to understand what is covered and make sure that insured covered equals replacement value,” Brown said. He has options with Farm Bureau that can provide 150 to 200 percent of insured value of a home for a major claim for qualifying clients.

Another importance term is a “lake estate policy” or available coverage for costs that accrue because of a complete home rebuild following a catastrophic loss. That’s where “loss of use” insurance becomes important, because it can cover housing costs during a rebuild over a pre-determined period. Brown said the time period some carriers like Farm Bureau are willing to cover during a home rebuild have increased from 12 to 18 months to 24 months. That can save clients tens of thousands of dollars.

“That makes sense because if you have a lakefront home that has burned down, it may take a few years to rebuild it,” Brown said.

If property owners suffer a significant loss, any repairs must adhere to new laws and building codes. For example, one of Brown’s clients last year needed to install a new septic tank on their property following a catastrophic loss. But because the building code had changed in that municipality, the septic field needed to be engineered. An ordinance and law clause and coverage can help ensure such added costs are covered.

“We can write it at 25 percent of home value,” Brown said. That was significant for this particular client, because Brown helped them save about $60,000 on the rebuild cost of that engineered septic field.

One of the better signs for lakefront property owners, and any homeowner today needing some type of property and/or liability insurance is that rates have moderated or even fallen in some areas of the country in 2026, including in Michigan. Wholesale insurance brokerage Burns & Wilcox said in its 2026 Property & Casualty Report for Q2 that stable rates have occurred because of softening conditions across the market.

Some of the reason for moderating rates in the U.S. is because of two tame Atlantic hurricane seasons in the southeastern part of the country, and fewer weather-related catastrophic storms elsewhere in the U.S., resulting in a trickle-down effect leading to more carriers showing interest in increasing its book of property customers.

The U.S. insurance sector reported an estimated $63 billion underwriting gain in 2025, which was more than double the $23 billion recorded in 2024, according to Verisk, the Burns & Wilcox report stated.

“We saw a harder market with increasing rates for a few years so now we’re seeing a softening which is good for the consumer,” Stanford said. “It means more competition for the average (homeowner).”

Carrier are particularly interested in building its base of high-net worth clients, who often have additional insurance needs and therefore represent a growth opportunity with upselling possibilities. Lakefront property owners automatically have a higher propensity to be considered high net worth based just on home and land values.

“There’s a lot of competition among carriers for this (demographic),” Stanford said.

There is often less competition to insure property owners who either are renting their primary home to earn some extra income during the year, or investment property owners renting their home or condo for much of the year. These clients represent higher risks because of the unpredictability of renter usage and the unfamiliarity renters have with their vacation properties, Brown said.

Stanford agrees, saying homeowners interested in renting their property – even occasionally – need extra coverage because of the inherent risk. Some carriers may deny coverage of rental properties entirely. Either way, homeowners should disclose their intent to rent because a claim caused by renter’s issue on a property without adequate coverage could result in significant financial loss.

Plus, the property owner may not be able to find coverage from any carrier given their checkered transparency track record.

“You could be looking at huge losses if you don’t disclose this information,” Stanford said. “Some carriers will deny coverage. For others there may be restrictions.”

Brown can offer some clients specialized homeowners’ coverage if they decide to rent their property, provided they do so on a well-known and used rental site like Airbnb, Vrbo and others. Either way, disclosure is critical.

The bottom line is that lakefront property owners enjoy the benefits of higher property values, but they also face more insurance risks. The potential for accidents is higher on water, and insurance agents recommend that lakefront property owners carry enough coverage to make them whole should a catastrophic incident occur from a home fire or flood to a severe bodily injury.

Lakefront property owners, and any homeowners, should disclose all their valuable items, types of watercraft, secondary buildings like boat houses and sheds. They should ask their insurance agents about specialized types of coverage needed given their risk profile. Heavy rains leading to a flood, for example may not be covered under standardized homeowners’ policies. It depends on the location, condition and age of the house, the insureds’ claim profile and more.

“You want to have regular meetings with your agent because it’s hard to know what you need to have covered and for how much,’ Stanford said. “Most (clients) won’t know themselves. It’s not their job to know. It’s my job to know.”

Brown said homeowners should always know what is in their policy and what is covered. The language varies in similar policies from one carrier to another.

“You have to read the fine print, or at least know what it says,” Brown said. ­ ­­­