Is vacant house insurance necessary?

A common problem in these days after the real estate bubble popped is for individuals to be relocating to another area for jobs, better schools, economic advantage, or family reasons.

Unfortunately, the house you own cost more to purchase than it is worth on the current market.

Moving is a necessity and, if you are lucky enough to be able to afford a new home, you may choose to leave the old home unoccupied.

Unoccupied or vacant houses are susceptible to a number of risks such as:

• Break-ins – because an untended house is attractive to thieves and vandals
• Lack of emergency response – just because no one is around to call the police or fire department
• Injury to people entering the house – from failure to shovel sidewalks, slippery floors, or loose carpets are hazards that may cause injury, leading to a possible lawsuit
• Liability coverage even for those who enter your house illegally – even teens that break in and party may be invalidated
• Vandalism to the building and premises just because they are unsupervised
• Incidental electrical fires, breakage of pipes due to weather, bursting connections to appliances

By definition, an unoccupied house is one that still contains minimal furniture and appliances but is not inhabited on a regular basis. Vacant houses contain only fixed appliances and no occupants.

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How Vacancy and Lack of Occupancy Affect Homeowner’s Insurance

Most homeowner’s insurance policies have a clause invalidating certain types of coverage if the building is left unoccupied or vacant for more than thirty days. Some state forms have lesser periods and some more.

Talking to your insurance carrier and notifying them of the vacancy of the building is necessary.

Your current insurance company may be able to add a clause that will allow your coverage to continue at an additional premium.

Often, however, a new policy must be issued to ensure coverage due to policy provisions or the reluctance of insurers to continue insurance upon an unoccupied or vacant home.

In any case, your premiums for insuring the vacant dwelling will be higher than those incurred under a homeowners policy.

Often individuals will assume that they can just leave the house well supervised and fail to mention the vacancy or lack of occupancy. Unfortunately, insurance companies can easily become aware of the status of a home by contacting the post office, neighbors, or utility companies.

Filing a claim under these circumstances can lead to charges of insurance fraud and subsequent forfeiting of your rights under a claim.

Strategies to Follow when Moving and Leaving Your House Vacant

To avoid being without insurance if you need to move and leave your home uninhabited, follow these steps to protect you and your assets:

• Notify your insurance agent or insurance company about the impending change in habitation. Read the provisions in your insurance policy and ask, too.
• Obtain other insurance to protect your property and guard your liability if necessary. This insurance is available and worth the cost.
• Be practical to protect your property:
• Alert fire departments and police forces to protect the premises
• Arrange with neighbors to oversee the property and call you with problems
• Secure doors, locks, and windows to avoid vandalism and illegal entry
• Prevent freezing of the HVAC system, fire sprinklers, and household appliances
• Shut off and drain the water supply, then drain the systems and appliances

Theft coverage for property may be limited or suspended if you are living elsewhere temporarily because this type of coverage applies largely to the main insured dwelling. If you are not living at the main dwelling, only 10% of the value of the dwelling may be offered.

An alternative to leaving the home vacant might be to rent the dwelling to a tenant to ensure ongoing supervision.

Even so, if you rent the home, you will need to purchase an alternative type of insurance since the standard homeowners policy does not provide insurance for rentals.

Recommended Coverage for Vacant Homes

Most insurance companies refuse to provide insurance on vacant homes, but the few who do offer this type of insurance ordinarily offer actual cash value insurance rather than replacement cost coverage.

Replacement cost is the amount it would take to rebuild your home using similar kinds and qualities of material.

Actual cash value pays the value of your home in consideration of its age as well as wear and tear.

The standard homeowners policy has extremely broad coverage of perils, but an alternative policy protects you against the following perils:

• Fire, smoke, wind, hail, lightning, explosion, vehicle damage, and civil unrest
• Vandalism and theft should be covered, but ordinarily a substantial deductible applies to this type of coverage as well as glass coverage.

A separate liability policy or rider must be issued to provide premises liability to protect your interests.

Shopping for Insurance on a Vacant Home

Since this type of insurance is difficult to obtain, it is an excellent idea to shop carefully for the best premium because they can vary from $1,500 every six months with one company to $5,400 every six months.

The insurance company or agency that has carried your insurance can often obtain these quotations for you, considering that he or she is familiar with you and the property.

As with any type of insurance, examine licensing, financial stability, and complaint history of the insurance companies that give you a quote. The following sources can help with this research:

• Your state’s insurance department – to find their web site, go to the National Association of Insurance Commissioners (NAIC) and click on your state
• A. M. Best – an insurance credit rating association for financial information
• Standard and Poor’s Rating Services
• NAIC & The Center for Insurance Policy and Research

Insurance companies with an excellent credit rating tend to be more prompt and efficient about paying insurance claims if necessary.

Saving Money on Insurance

Comparing prices is one of the most effective ways of saving money on insurance.

When individuals have been placed in the situation where they are driven to essentially abandon their property, premium costs are important additions to budgets.

Even more important is protecting a vital portion of your assets in the process of changing locations and/or jobs.