It is important to know that standard property insurance policies, both homeowners and 1-4 family dwellings used as investment property have an exclusion that removes some coverage if a property is vacant for longer than a specific period of time.
This time frame might be 30-90 days depending on the insurance company.
What is considered a vacant property?
There is a big difference when it comes to the insurance contract and how they determine claims between the difference between vacant and unoccupied.
Vacancy can be defined as substantially empty of personal property necessary to sustain normal occupancy.
Unoccupied means that the property has been left in a state where the property can still be used with most items or possessions present.
The insurance policy exclusions are for vacancy, not unoccupied.
Studies show that vacant properties have a much greater risk of claims especially vandalism, theft, glass breakage, and major water damage.
How do I insure a vacant property?
A vacant home can be harder and more expensive to insure. Whether you are in process of selling a home or you are in the middle of a major renovation on a rental property you just purchased, finding out that you might not have coverage is better before you have a claim rather than after.
Insurance Policies for vacant properties are usually written on a basic FL1 or HO1 form. This form covers only:
- Fire
- Lightening
- Wind
- Hail
- Explosion
- Glass breakage
- Aircraft
- Smoke Damage
- * possibly Vandalism & theft (with an additional endorsement)
Insurance companies will also apply a vacancy surcharge to the policy as well. This is what causes the premium to increase significantly.
The surcharge can be removed and the coverage form can be changed once you have the property occupied. Since insurance is rated on a prorated basis you might only be paying the extra cost for a few months.
Should I tell my insurance company my house is vacant?
Yes, it is important to let them know that your property is going to be vacant for longer than the 30-60 window.
This way they can endorse the policy and keep some coverages in place to prevent any issues during a claim.
Reach out to your insurance agent to have this conversation to make sure you have the appropriate coverage in place for your specific situation.
If you don’t have a relationship with an agent or want a review of your insurance then click the button below to schedule a review with one of our trusted insurance advisors.
