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Vacancy and Homeowners Insurance

One of the fallouts of the poor real estate market of the past couple of years is the number of homes that have been on the market for a long time. Many of them have been vacated by owners who have moved on to another home, leaving their vacated home either vacant (little or no furniture or personal property) or unoccupied (no people) for a significantly long time. In some cases now a couple of years or more. This is an insurance problem because, after 60 days of vacancy, the homeowner’s policy automatically takes away important coverages.

The intent of the following article by Jack Hungelmann Corporate 4 Insurance Agency, Inc. is to make you aware of vacancy coverage restrictions in a homeowner’s policy and how, by using risk management strategies, you can help avoid those restrictions. In some cases, you may actually have to purchase insurance for a vacant home.  We have several markets available for vacant home insurance.

Defining "Vacancy"

A home is "vacant," as defined by the courts, if it does not contain enough furniture for a resident to reasonably live there. So, according to that definition, a home could be considered vacant unless it has kitchen appliances, daily conveniences such as utensils, table and chairs, at least one bed to sleep on, and somewhere to sit (i.e., a couple of living room chairs), and items for personal hygiene.    If there were no bed, no appliances, no furniture, no dishes nor silverware, no soap or shampoo, (items that the average person would expect for daily living) chances are the insurance carrier could apply vacancy exclusions to the loss. At the very least, you may have to spend thousands of dollars in attorney fees to contest the insurer's decision.

Vacancy and Homeowners Insurance

There are two problems with a home that is vacant greater than 60 days:

  • Vandalism and glass breakage are not covered at all. In fact, newer homeowner’s forms often exclude any ensuing loss started by vandalism (i.e., vandals burn the house down!).
  • Most homeowner’s insurers will not continue to insure a vacant home. If your policy is canceled or non-renewed for vacancy reasons, there are only a handful of insurers willing to insure a vacant home.  Usually there are two options for vacancy insurance:  Coverage is very limited but the premium is reasonable, or the coverage is as good as the homeowner’s policy but the premium cost is 4-5 times greater.

Preventing the Insurance Penalties

The absolute best (and least expensive) strategy for dealing with the homeowners policy vacancy exclusions and restrictions, as well as the risk of your policy being canceled or non-renewed, is to do what the company allows to consider your home unoccupied not "vacant."  Please give us a call so we can assess your situation and contact the carrier for approval. 

Reducing the Risk of an Unoccupied Home

Even if you succeed at keeping your home fully insured and avoiding the vacancy penalties, you still face increased risks to your home because it's not occupied. A major loss—even one covered by insurance—would be bad news in your efforts to sell your home, further delaying the sale by months. You can reduce your chances of having a major loss from break-ins, fires, smoke damage, and even water damage from frozen pipes by installing a central alarm monitored for burglar and fire/smoke and adding an optional temperature sensor to protect the pipes from freezing. The alarm could also qualify you for a discount on your insurance rates.

Another loss reduction strategy is to either rent your home on a month-to-month or annual basis.  Again, you will need to call us as the companies have additional requirements when a home is rented or not occupied by the owner.

Insuring a Vacant Home

If there is no reasonable way to avoid your home from being vacant, we have several carriers that will provide insurance coverage even with this increased risk.  While the rates may be higher than standard homeowner’s premium, the cost will be minimal when compared to having reduced or no coverage in the event of a claim. 

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