Empty Homes Need Additional Insurance

There are many reasons why someone might leave their home unoccupied for months at a time. In each case, there's one very important person you should call well before locking the door that last time -- your insurance agent.
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There are many reasons why someone might leave their home unoccupied for months at a time: Maybe you moved to another state and your old house is languishing on the market; or you can no longer afford your mortgage so you're working out a short sale and couch-surfing at your sister's house; or maybe you struck it rich and are taking a six-month, around-the-world cruise.

In each case, there's one very important person you should call well before locking the door that last time -- your insurance agent.

"Many people don't realize that their standard homeowners insurance policy won't provide full coverage if their home sits unoccupied for a certain amount of time," says Ruth Stroup, a Farmers Insurance Group agent from Oakland, Calif. "The timeframe varies depending on your state and insurance carrier, but typically it's 30 or 60 days. After that, you could be liable for losses related to theft or vandalism."

Unoccupied or vacant (no furnishings) homes are considered a higher risk by insurers because no one lives on site to maintain and protect the property. We've all seen news reports of abandoned or foreclosed homes that have been stripped of their fixtures, overrun by squatters or simply vandalized.

Also, if you're hoping that your insurer simply won't notice your house is unoccupied, think again. As Stroup points out, "Insurance companies increasingly are doing routine inspections at policy renewal time. If they find that the property is unoccupied, chances are your policy won't be renewed."

So what should you do if you find yourself in this situation? First, check your homeowners policy for language regarding unoccupied or vacant homes. Once you know that your house will be empty for more than the allowable time -- and before the deadline passes -- contact your insurer to find out whether they offer vacant home insurance. They may be willing to make special provisions depending on the projected duration of vacancy.

If your carrier doesn't offer such coverage, find one that does. An independent insurance agent can help gather quotes; if you don't know any, ask for referrals or use the Independent Insurance Agents & Brokers of America's search engine.

Foreclosure or short sale. This is grim but critical information to know if you're losing your home through a foreclosure or short sale: Even if you've already moved out, you're still responsible for insuring the property until you no longer officially own it.

"The lender could be showing your house to prospective buyers," notes Stroup. "If someone slipped and fell, you'd be liable for damages since you're still technically the owner. The same goes if a pipe burst or a falling tree does damage."

Landlord insurance. Many homeowners prefer to rent out their property until the real estate market rebounds. From the insurer's perspective, this is preferable to leaving the house vacant, although it's still considered riskier coverage because tenants are less likely than owners to protect and maintain the property.

"Landlord policies are structured differently than homeowners coverage but often cost about the same," says Stroup. "Homeowners policies typically provide considerable coverage for personal property, which you probably wouldn't need here because your renters are responsible for insuring their own things."

A few features and considerations regarding landlord insurance:
  • You're insuring the structure of the building as well as any personal belongings you leave on the premises (e.g., appliances, furniture, landscaping equipment) against hazards such as fire, water damage, lightening, etc.
  • There may also be limited coverage for other structures located on the property such as a detached garage or shed.
  • It will reimburse you for lost rental income if the home becomes uninhabitable due to fire, water damage, etc.
  • Make sure to buy adequate liability insurance to protect yourself from potential tenant lawsuits. Many landlords also buy a personal umbrella policy to provide additional liability protection.
  • Your policy won't cover your tenant's personal property or liability claims against them, so urge them to buy renters insurance -- it's cheap and worth it.

To protect your current and future assets, make sure you always have sufficient loss and liability insurance on all your property and possessions. Better safe than sorry.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

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