Vacant Property Insurance

Situations arise when you own property in which the building you own may be vacant or unoccupied for a certain amount of time.

Most home and property insurance policies have a clause that ceases coverage for vandalism and glass damage after a building has been vacant for a certain amount of time. The usual time limit for a home policy is sixty days, but it may vary, depending upon the type if insurance carried.

Homes can remain vacant when the owners move from one area to another to follow jobs or other circumstances. Sometimes a home becomes vacant when the original owner dies or needs to be moved to a nursing home.

No matter what the reason, the mortgage company and your interests are dependent upon maintaining the adequate property insurance and you need to be aware of policy provisions and endorsements that can limit the insurance coverage.

Commercial buildings become vacant due to changes in commercial needs, shifting population patterns, and abundance of office spaces.

Commercial insurance has some of the same provisions with regard to insurance as does home insurance, so it is necessary to pay careful attention to ensuring that your interests as owner of the property are covered.

Vacant Home Insurance

A home that is vacant ordinarily loses coverage for vandalism, glass damage, and theft after a period of thirty days. This may vary, depending upon the laws in your state.

Consult with your state’s insurance department for questions.

You can find a link to your state’s department by following the link included in the National Association of Insurance Commissioners (NAIC) website.

If you are purchasing insurance on a home, be sure that you read the policy carefully, especially if you are contemplating moving from the home.

Be clear with your insurance company or agent about the intentions you plan to pursue with the home.

Failure to disclose vacancy and unoccupancy can result in the coverage being rescinded and the premiums returned.

Be sure to verify with your agent that the insurance company is aware of the vacant status of the home.

Cautions to Protect Yourself if a Home is Vacant

The key to protecting yourself is to make certain that communication lines are open between you and your insurance company or agent. Complete disclosure, in hard copy if possible, will facilitate coverage. Other precautions you can take are:

• Read your policy to make sure you thoroughly understand the vacancy clauses in the policy.
• If your property is subsequently rented to someone else, be sure that the policy you have is not a homeowner’s policy. One of the terms of a homeowner’s policy is that the property is occupied by the actual homeowner. Purchase a separate policy to cover perils such as fire, explosion, windstorm, hail, ice, snow, vandalism and theft as well as liability coverage for you as owner.
• Ask about vacancy provisions in the policy. Some policies do not have this provision and it is more desirable to purchase these if you are planning to move.

Commercial Property Provisions with Regard to Vacancy

Commercial property coverage varies from homeowner’s coverage in that it is intended to provide coverage for property intended to earn money for the owner. Examples of this type of property are:

• Multi-family dwelling units such as apartment houses
• Office buildings
• Manufacturing and warehouse buildings
• Shops, stores, or other such buildings

Commercial property is covered by the same types of perils as are covered on a homeowner’s policy, but with fewer restrictions.

The vacancy clause allows vacancy up to sixty days without penalty.

When the period for vacancy is ended, however, coverage for vandalism, theft, glass, and some types of other damage ceases.

An example of this type of coverage that can be compromised is freezing of sprinkler systems and pipes, particularly if special care is not taken to ensure that the systems are protected from freezing.

This can be particularly important in weather such as winters in the Northeastern United States where cold can be particularly destructive.

Suggestions About Insuring Vacant Buildings

Recognize that, if a building of any type is in the process of becoming vacant because you move, an elderly parent moves, or the building is no longer rented, you will have to get quotations for replacement insurance.

The premiums, undoubtedly, will be higher than you have been paying, but the coverage is available. Consult your agent or insurance company about insurance. They may have to access specialty lines for insurance, but they will give you a quote.

Building Coverage

Plan to insure the building for at least 80% of its value. Some companies may offer replacement cost coverage, but most prefer to offer actual cash value coverage on vacant buildings, whether homes or commercial buildings.

Perils to be insured against:

• Fire, explosion, lightning
• Vehicular damage, vandalism
• Wind, hail, sleet, ice, snow, and extreme cold
• Liability coverage should be purchased to protect your interests if someone is injured while on your premises

A substantial deductible should be applied to reduce premiums. Substantial deductibles would be in the area of $5,000 to $10,000 per occurrence.

Insurance companies are more likely to accept buildings that are vacant if the individuals and businesses that own the property are willing to participate in the risk.

Contents Coverage

It is advisable not to insure contents of a vacant building unless the contents are an integral portion of the building.

Separate storage of contents is a viable choice and much less difficult to insure.

Getting Coverage

Even though insurance on a vacant building is difficult to obtain, it is still wise to examine the insurance company. Follow the following steps:

1. Check to see if the insurance company is licensed to sell in your state by going to the insurance commissioner for your state.
2. Examine the financial status and complaint ratios for the insurance company by accessing the following links: NAIC, A.M. Best, or Standard and Poor’s.
3. If possible, get at least two quotations for this type of insurance to make sure you have comparison quotes

Again, please be certain to read your policy carefully and understand all the duties of an owner under the policy. Plan to walk through the building on a regular basis to check its condition.

If you plan to move out of the area, contact a real estate management firm that will follow your instructions with regard to maintenance and review.

Be sure to always compare rates using the FREE tool below!