Last week we discussed getting the best value on rental property insurance. But what if you are exiting a property and have no intention of renting it out or have a prolonged difficult time placing renters into your recently vacated property? In that case you likely need some form of vacant home or vacant property insurance. First, you need to know the difference between an "unoccupied home" and an "vacant home" because it makes a difference from the insurance company's perspective. You might be overpaying to insure the property, or much worse, be under-insured or possibly not insured at all. That's a bad situation.
This blog post defines the two categories of property discussed above and offers you insurance considerations for both situations.
- If the home is immediately suitable for occupation, it's considered unoccupied.
- The owner's personal property remains inside, the utilities are on and appliances are functioning.
- If a home renovation is limited enough that the furniture and other personal property can be left behind, the home is unoccupied.
- If you're on vacation or in the hospital, your property is also unoccupied.
- If a home is vacant, the owners have removed their personal property.
- The utilities may be shut off. This is more common when the property is on the market or being rented.
- Vacant homes pose significantly higher risk to insurers, and the price and coverage of vacant home insurance reflects this.
Insuring an unoccupied home
Home insurance companies typically require you to contact them and request an endorsement or a special permit for a home that will be unoccupied for 30-to 60 consecutive days. The time limit should be stated in your policy's vacancy clause. In some cases, you may be charged for a permit or endorsement, but unoccupied home insurance coverage is much less expensive than vacant home coverage. If you routinely divide your time between a primary and a vacation home, you may choose to purchase a package covering both properties when you are and are not in residence.
Vacant home insurance
A vacant home is harder and more expensive to insure. A vacant home will require either an endorsement or a separate policy, depending on the insurance company. Some insurance companies will not insure vacant homes at all. Coverage for a vacant home will be more restricted than regular home insurance, covering standard perils such as fire and wind, but not perils, such as water damage due to frozen pipes, glass breakage or vandalism.
Cost to insure an empty home
Coverage limits and premium costs for unoccupied and vacant homes vary, based on how long the dwelling will be empty, its vacant or unoccupied status, and the steps you take to protect your property. For example, an unoccupied home may be covered with the addition of a permit or endorsement, and this typically costs less than $100. Without it, damage that occurs while you're away is unlikely to be covered. Vacant home insurance, on the other hand, is considerably costlier--between 1.5 and three times as much as standard insurance for occupied properties. However, the higher rate is an annual one. Most property doesn't stay vacant year after year, and many vacant property insurers recognize this, allowing you to prorate the annual cost and only pay for the time you need.
Be honest about your empty home
Don't try to pretend that your empty home is occupied. Never lie to your insurance company when you are buying homeowners insurance; it could provide grounds for denying a claim and may result in the cancellation of your policy. It's not difficult for an insurer to tell if the damage you're claiming happened because no one was there--how else would vandals have been able to shack up in your living room, or a small water leak turn your basement into a swimming pool? If you fail to inform your insurer that the property is vacant, and your company cancels or declines to renew your policy, your new policy is likely to be even more expensive-- our-to-five times the cost of a standard policy.
How to save on empty home insurance
Asking a house sitter to watch over an empty home may help reduce your insurance cost. Individual insurance companies vary in the way they view house sitters. Having a house sitter or neighbor check on your property may not make a difference to your insurance company, since the property is not occupied by the owner.
Will your home insurance cover your home if you set it up as an Airbnb?
If you're thinking about renting out your empty home as a way to make some income, don't assume you'll be covered. Instead, check with your independent insurance provider. Many home insurance companies that offer coverage for short-term stays limit them to four weeks or less. Review your homeowner's policy carefully before signing up to share your home. Some home polices that cover short-term rentals require advance notification. Discuss renting out your home with Airbnb (or a similar company) with YOUR agent here at TriState Insurance so there are no surprises if a claim needs to be made.
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