Homeowners leave their properties vacant for a host of reasons. A vacant home is a prime target for theft, vandalism, or other damage. Before homeowners pack up the final box, a call to their insurance agent is in order to secure proper coverage for their newly-vacated property.
Once a home is vacant for 30 or 60 consecutive days (depending on the policy), a typical homeowners policies will not cover vandalism, water damage, glass breakage, or theft. So if a vandal sets a vacant house on fire or breaks windows, or if a child trips and falls in the driveway or drowns in the backyard pool, the homeowner is liable for the damages. Even if the home’s vacancy status did not contribute to the damages, vacant homes typically are not covered under homeowners policies.
Consider what happened to a Texas homeowner who thought existing homeowners policy was sufficient for their vacant home:
Several months after homeowners vacated their Texas home, the house was damaged from a fire that spread from a neighboring property. The homeowners did not secure a vacant property policy nor did they purchase an endorsement which would have provided coverage for extended vacancies.
When the carrier denied the claim, the homeowners took the carrier to court. Although the homeowners won the initial trial, the carrier appealed and the case eventually reached the Texas Supreme Court, which ruled in favor of the insurance carrier.
In the state supreme court’s decision, it found that the vacancy clause in the homeowners policy did not cover the property beyond 60 days of vacancy. Further, the court found the carrier was within its rights to deny the claim even though the property’s vacant status did not contribute to the loss (Sanov, 2014).
With 13 million homes sitting vacant year-round in the United States, homeowners are opening themselves up to potentially disastrous lawsuits and damages unless they secure adequate vacant property coverage (Holland, 2016).
Vacant vs. Unoccupied
Courts across the United States define “vacant” as a home that does not contain any objects or people while an “unoccupied” home does not contain any people. This distinction is critical when considering many homeowners policies contain a “vacant, unoccupied, or uninhabited” exclusion. Some people think that by leaving a few basic furnishings in an otherwise empty home the existing homeowners policy will continue to protect the property. Insurance professionals warn against this strategy as the insurer will likely apply the “vacant, unoccupied, or uninhabited” exclusion in the event of a claim. Fighting this decision in court could cost the homeowner thousands in legal fees (Hungelmann, 2009; Umberger, 2010).
Before homeowners choose not to carry insurance on a vacant home while trying to sell the property, they need to decide if saving a little money on insurance premiums is worth the gamble. What could happen to a vacant home while the owner is trying to sell it? Consider the following possibilities:
- Vandals start fires, break windows, steal appliances or fixtures
- Prospective buyers trip and fall on a crack in the driveway
- A child drowns in the swimming pool
- Pipes burst and cause extensive damage to drywall and flooring
- A storm knocks down a tree and damage the roof
- Animals make nests in the attic, garage, basement, or walls
Homeowners aren’t the only ones at risk for leaving a vacant home under an existing homeowners policy. If a claim is denied, the agent is also at risk for an errors and omissions (E&O) claim for failure to address the change in occupancy status of the property (Holland, 2016). Vacant property coverage can be difficult to place; however, Atlantic Specialty Lines has access to several products by multiple carriers to help homeowners protect their investment even if they’re not at home.
Holland, K. (2016, March 7). What to know about insuring vacant property. Insurance Journal, 18-23.
Hungelmann, J. (2009). Managing the risk of a vacant home. International Risk Management Institute. Retrieved from https://www.irmi.com/articles/expert-commentary/managing-the-risks-of-a-vacant-home
Sanov, P. (2014, Sept. 17). Does vacancy preclude coverage, even if not related to cause of loss? Texas coverage series. Property Insurance Coverage Law Blog. Retrieved from http://www.propertyinsurancecoveragelaw.com/tags/vacant-property-coverage/
Umberger, M. (2010, Oct. 20). 5 insurance tips for vacant homes. Inman.com. Retrieved from http://www.inman.com/2010/10/20/5-insurance-tips-vacant-homes/