Did you know you need unoccupied or vacant home insurance if your property is going to have nobody living in it for more than a few weeks? Too few people realize that, but failing to have the right coverage in place can see insurers refusing to pay out if you need to make a claim.
This isn't a small issue. RealtyTrac, a company that compiles housing and property data, estimates that over 1.3 million American homes were vacant at the start of February 2016. Read on to discover when you need special insurance and how to get it at a reasonable price.
Defining Vacant and Unoccupied Homes
A vacant home is one that is empty. It contains either no furniture and personal property or too little for anyone to be able to live a reasonable life there. Sometimes utilities have been disconnected, as well.
An unoccupied home is one that at minimum still contains enough furniture and possessions for someone to occupy it immediately. It should have at least a bed, a couch or chairs, a table and chair at which to eat and some working appliances, meaning the utilities are connected. Perhaps more often, an unoccupied home is one that's fully furnished and equipped, but has nobody in residence.
Insurance companies view vacant homes differently from unoccupied ones. But you'll need special coverage, beyond your standard homeowners policy, for either.
When You Need Unoccupied or Vacant Home Insurance
You need to check your homeowners policy to find out when your insurer is going to define your home as vacant or unoccupied. But many will require you to get special coverage if nobody's going to live in the property for 60 days, and some may specify 30 days. Beyond your company's cut-off point, claims may be declined.
Don't leave it until after the covered period expires to let your insurer know your home will be vacant or unoccupied. You need to tell the company either before you leave the home, or during the 30 or 60 days (or however long your policy allows) before your standard coverage lapses.
Not telling the insurer and hoping it doesn't notice is a risky strategy, not least because the investigation that often follows a major claim is likely to uncover the truth. And that could see your claim declined. As worryingly, insurance companies sometimes inspect homes, especially around renewal time, and you could easily see your coverage terminated if your secret is revealed. It's bad news when an insurer declines a relationship with you because it can be much harder and considerably more expensive to find coverage from another company.
Remember, you need to insure your home right up until the moment legal ownership transfers to someone else, certainly if you have a mortgage. During the dark times of the Great Recession, too many people abandoned their homes while they were negotiating short sales with their lenders, and ended up with uninsured losses because they didn't have vacant home insurance.
Times You Might Need Unoccupied Home Insurance
It's not just when times are hard financially that you might need special coverage because your home is unoccupied. Here are a few examples:
- You win the lottery, and take a three-month round-the-world trip
- You get a six-month contract to work somewhere that's too far from home to commute
- You're injured or become sick and have to spend extended periods in a hospital and in a facility recuperating
- You buy a different home and move in before yours closes
- You're a servicemember and are posted overseas or to a distant base on U.S. soil
You should also let your insurer know if you're having any sort of extensive remodeling or renovation work carried out, as you may need extra coverage for additional liability and other risks, as well as unoccupied home insurance.
Ways to Avoid Unoccupied and Vacant Home Insurance
Vacant home coverage tends to be more expensive than that for unoccupied risks. You can avoid the former by leaving sufficient furniture and appliances in your home to reach the unoccupied threshold. Remember, you often need to leave utilities connected too. If you've already moved all your furniture out, consider renting some.
To avoid unoccupied home insurance, you can simply get in a house sitter. Clearly you want someone you can trust, and a friend or relation is ideal. If you have to resort to a stranger, ask for references and call references to confirm them. Also check the person's ID and consider carrying out a background check. Whomever you leave in charge, you should be sure your interests are protected, and you might want to consult an attorney about any legal implications arising from the arrangement.
Another option, which may be the most attractive in some circumstances, is to rent out your home. That will provide you with an income, but you will need a landlord policy.
There's a good chance your existing insurance company will, for a price, issue a special permit or endorsement if you leave your home unoccupied. If that price is too high, consider shopping around for a more sympathetic insurer.
Some companies won't cover vacant homes at all, and you may need to search out either one that specializes in high risks or a "surplus lines carrier," which is an out-of-state insurer that may be less tightly regulated than ones licensed locally. Your main concern at this point is the level of coverage you're going to get. Your protection against loses is likely to be higher if you choose "full replacement cost coverage" rather than "actual cash value coverage." No matter how much you pay, you may well find it impossible to insure losses arising from water damage, theft or glass breakage.
How to Save on These Insurances
It's not unreasonable for insurers to charge more to cover risks on empty or unoccupied properties. They can become magnets for thieves who want to strip them bare down to the last length of copper piping, and for vandals who can cause immense damage. And something that can be a minor issue when people are in residence – such as a water leak – can become a massive and costly problem when there's nobody there to see it and get it fixed.
The Insurance Information Institute (III) suggests you may get lower premiums if your home has:
- A central alarm system
- Deadbolt locks
- Smoke detectors
- Been "winterized" to stop plumbing fixtures from freezing
III vice president Loretta Worters is quoted on that organization's website: "Arranging for someone to come by regularly to check on the place may result in a lower premium. But generally speaking, you could pay 50 or 60 percent more for a policy on an unoccupied home as compared to a regular homeowners policy."
So, when it comes to insurance, the cost implications of leaving your home vacant or unoccupied are considerable. But the financial implications of ignoring the situation could be devastating.