When a property sits vacant for any period of time, it faces a unique set of risks that differ from those of an occupied structure or one protected by inland marine insurance during construction. To safeguard these vulnerable structures, vacant home insurance policies are designed to offer much-needed protection. In this article, we will answer frequently asked questions about insuring a vacant home and explore the coverage provided by vacant home insurance.
What is Vacant Home Insurance?
Vacant home insurance, also known as vacant dwelling or vacant property insurance, provides coverage that protects unoccupied structures during vacancy. It offers compensation for physical loss or damage resulting from a covered loss.
Who Buys Vacant Home Insurance?
Vacant home insurance is typically sought by various residential clients, depending on the situation. Some common types of clients include:
- Landlords between tenants
- Homeowners selling their residence after leaving the property
- House flippers
What Exposures Does Vacant Home Insurance Cover?
Vacant home insurance is primarily designed to protect the structure itself from damage when it is unoccupied. While coverage specifics may vary among insurance providers, a vacant home insurance policy typically covers exposures such as:
- Fire
- Lightning
- Explosions
- Windstorms
- Hail
- Smoke
- Water intrusion, caused by sprinklers or leaky pipes
Additional coverage for vandalism and theft may also be available, but this can vary depending on the structure and the insurance provider. Liability coverage may be provided for unoccupied homes, but the availability and restrictions can vary among insurance providers. Certain hazards such as ponds, lakes, swimming pools, hot tubs, swing sets, or trampolines on the property might affect the eligibility for liability coverage. Clients should consult with their insurance agent for specific policy information.
What Kinds of Dwellings are Eligible?
Residential vacant structure policies are available for completely vacant dwellings that are well-kept and in good repair. Eligible dwellings for vacant structure insurance may include:
- Single-family homes
- Condominiums
- Townhouses
- Duplexes
- Triplexes
- Fourplexes
These properties can be awaiting sale or undergoing renovations, depending on the extent of the remodel. Anchored mobile homes or those on a permanent foundation, as well as individual condominiums or townhouse units, may also be eligible for vacant structure insurance. However, structures that are slated for demolition are unlikely to be covered.
The risk value limits can vary depending on the insurance company. Vacant structure insurance products, such as those available through US Assure, offer coverage for up to $5 million in property limits and up to $1 million in general liability limits (subject to underwriter approval).
What Coverage is Available?
Coverage provided under a vacant home insurance policy can differ between providers. For example, the vacant structure insurance product offered by US Assure provides two coverage form types: basic and special. The basic form includes vandalism coverage. To qualify for the special form, the structure must be less than 40 years old with no prior losses or lapses in coverage. If the structure was built more than 40 years ago, it must have been fully gutted and renovated within the past 30 years. All protection classes are eligible as long as a fire station is located within six miles of the structure. Theft protection can also be added to the special form if the structure has an active central alarm system that monitors for fire and burglary.
In some cases, a multi-location option may be available, allowing clients to include multiple similar locations on one policy, provided that the policy limit does not exceed $5 million.
What if Your Client Has a Homeowners Policy?
Clients who have a homeowners policy may be covered for a certain period of time if their property is left unoccupied. The National Association of Insurance Commissioners states that a home may be considered vacant if it remains unoccupied for 60 or more days. However, homeowners should contact their agent or insurer before vacating, as some homeowners policies have a vacancy clause that may prevent claims from being paid if a home is vacant for 60 days or more. Clients might have the option to purchase a policy endorsement to protect their property during vacancy, but they should seek advice from their insurance agent to understand how their specific policy will respond to the circumstances.
FAQs
Here are some frequently asked questions about vacant home insurance:
-
Is vacant home insurance necessary even if the property is well-maintained?
- Yes, vacant home insurance is necessary even if the property is well-maintained. Vacant homes are more susceptible to certain risks, such as vandalism, theft, and undetected water leaks, which can cause significant damage.
-
Can I get liability coverage for my vacant home?
- Liability coverage for vacant homes may be available, but it depends on the insurance provider and the specific hazards present on the property. Certain hazards, like swimming pools or trampolines, might affect the eligibility for liability coverage.
-
Can I insure multiple vacant properties under one policy?
- Some insurance providers offer a multi-location option, allowing clients to include multiple similar vacant properties on one policy. However, the policy limit should not exceed the specified maximum.
Conclusion
Vacant home insurance provides essential protection for unoccupied structures against various risks and exposures. When a property is left vacant, it is important to ensure that it is adequately covered to mitigate potential losses. By understanding the coverage provided by vacant home insurance and consulting with an insurance agent, clients can make informed decisions to protect their vacant properties effectively.
