Blog

There are many reasons a commercial or residential property can become vacant for a significant period of time. When an owner dies, it can take months to get financial affairs in order while a home stands vacant; it can likewise take a long time to find a new tenant on a rental property when the previous one leaves. Investors buying a property for the sole purpose of “flipping” it may take longer than planned to make repairs and sell the house. These are just a few of the most common scenarios.

When that happens, owners need more than a homeowners policy. Most homeowner’s policies limit coverage after about 60 days of vacancy—the length of time will vary depending on the policy, but 60 days is fairly common. The insured might continue to have coverage, but significant exclusions will kick in after the time limit.

This is because vacant and occupied properties come with significantly different risks—and often, the risks involved with a vacant property are more costly. For instance, vacant properties are more at risk than occupied ones when it comes to vandalism and damage due to squatters, or water damage caused by broken pipes during the winter. Most homeowner’s policies are designed only for occupied properties, and won’t cover damage like this if the building is unoccupied.

Most of the time, insureds don’t realize they’ve gone over the time limit for vacancy exclusions on their existing homeowners policy. The insurance company usually doesn’t notify them, and they may not have taken the time to read their policy in detail. The way many people find out is by having a claim denied.

If an ensured expects that a property will stay vacant for longer than the limit on their homeowner’s policy, the obvious step they take is often to notify their carrier. Some carriers may be willing to add a rider onto an existing policy, but the majority will simply cancel the policy—leaving the property owner uncovered.

The recourse most owners take is to buy a policy specifically designed to cover a vacant property. These typically can’t be found with standard carriers. These policies usually cost more than a standard homeowners policy, but they also offer proper coverage for a range of risks that can be more expensive than you normally get with occupied properties.

Overall, an education process between insurance professionals and insureds who are in this situation is vital. The bottom line is that insureds always get what they pay for—and if they have to file a claim for damage on a vacant property, they’ll be glad they have this coverage. A wholesale insurance broker can be a great resource in helping find the right coverage to reduce or eliminate this type of exposure.