Vacant homes are the kiss of death to a standard insurance company.
Seriously. And if you don’t believe me, try this experiment:
- Call an insurance agent.
- Tell said agent you need insurance for a vacant property.
- Wait for the silence
- If you’re lucky, you may get some hysterical laughter.
To quote Leonard from an episode of The Big Bang Theory: (a guilty pleasure of mine)
“So, what’s up with that?”
It’s all about RISK.
To paraphrase another favorite (especially at this time of the year):
“That’s what insurance is all about Charlie Brown.”
The foundation of insurance is risk. And a vacant house poses way more risk than one that is occupied regularly.
Need some examples of risks associated with vacant homes? Here’s a few:
- Thieves break in and steal the copper plumbing (it’s happened in my neck of the woods more than once).
- The water pipes freeze and burst.
- The hot water heater croaks and floods the house.
- A homeless person decides to make your house his home. He starts a fire and POOF, your house goes up in flames.
But wait, you say, “Can’t those same things happen while I am living at the house?”
Absolutely. But, here’s the difference:
If the house is vacant, the damage may not be discovered for days. If you live there, you’ll notice a problem much sooner, like when I went into my basement and noticed the lake that had formed on the floor and the water running down the front of the water heater.
Can you appreciate the difference?
So, what does an insurance company consider vacant?
Excellent question. Like so much else in insurance, it all comes down to the policy. So, imagine my amazement when I pored through various forms and discovered vacant was not defined anywhere in the policy. Huh.
Let’s get real- in situations such as this, the claims department ends up determining vacant or not. So we asked our companies for their definitions of vacant. Although they weren’t identical, they did share a common theme.
Vacant- A building with nothing in it.
Unoccupied- The temporary absence from a building of an occupant, but with the occupant’s furniture and personal effects remaining.
Another way to differentiate the two- if the building is unoccupied, you could simply just move back in without disruption. If it’s vacant, it would take a lot of work to get it fit for occupancy.
What kind of problems can vacancy cause?
Claims problems! Big surprise there……..
Two exclusions immediately come to mind:
- Vandalism and malicious mischief if the dwelling has been vacant for more than 30 consecutive days immediately before the loss. Go back to my example about the theft of the copper pipes. Or even worse, someone breaks in and decides to put holes in the drywall, rip out the cabinets and overall just totally “f” up the house. (again- I’ve seen it happen).
- Freezing of a plumbing, heating, air conditioning or automatic fire protective sprinkler system, or of a household appliance IF you have not maintained heat or shut off the water supply and drained the system and appliances of water. Hmm, how often are one or both of those conditions met if you’re not living at the house anymore?
My shop, Alan Galvez Insurance, has experienced the surge of customers who can no longer afford their expensive homes and have relocated to more moderately priced digs. Sometimes the houses are for sale, sometimes not. So what can you do to get property & liability coverage for your vacant homes? Some possible solutions:
Option 1: Re-write to a non-owner occupied policy with the same company
- You keep with the same company, which could entitle you to additional discounts that you might not get with a standalone policy (for example, one of our companies offers a package discount if they already insure your primary home).
- Simpler application process- if you have to go the non-standard route, trust me, there’s a decent amount of paperwork, affidavits and just a general pain in the ass process.
- Since a property policy is written on an annual basis, the company will usually stipulate you have that entire year to get the house sold. If not sold within the year, they would cancel the policy.
Option 2: Re-write to a non-owner occupied policy, but with a different company
For example, we recently took on American Modern Insurance. They offer a vacant house policy. It’s a standard form without the mountain of paperwork you would need in the non-standard market. This would be a great option if your existing company isn’t able to or willing to do Option 1. We’ve used this option with several of our customers.
Option 3: Write a non-owner occupied policy in the non-standard market
If Option 1 and 2 don’t fly, this probably is the last resort. The application process is a little more involved and it’s possible you may not get as broad of coverage as you’d like, but it’s better than nothing. We’ve written several of these policies. Premiums have averaged about $300 every 3 months. Yes, I know. It’s expensive. But remember, the risk examples I mentioned earlier? That’s the reason. BIG claims money….with plenty of whammies 😉