You did it. You took the plunge and achieved your goal of owning a rental property. The house is designed to generate a constant stream of revenue, yet you find yourself between tenants for several months due to necessary renovations. Suddenly, the unexpected occurs, and a fire causes a total loss. When you contact your insurance company to report the damages, you are shocked to find your claim is denied due to an unoccupied or vacant home exclusion. Not only have you lost your investment and revenue stream, but you are also now financially responsible for the clean-up as well.
While this scenario may sound unlikely, countless landlords and investment property owners have found themselves in similar situations due to property insurance gaps. Click here to continue reading and find out more about how a vacant rental property could put your insurance coverage at risk.
What is an Unoccupied or Vacant Home Insurance Exclusion?
Most insurers include special limitations on coverage for vacant or unoccupied properties, whether primary, secondary or investment properties. Though the definition will vary from insurer to insurer, a vacancy is typically considered a home that is not inhabited and in which all furnishings have been removed. An unoccupied property is generally defined as one in which the furnishings and possessions remain, but an occupant is not present.
Most property insurance policies detail limitations of coverage for vacancies. Some will drop coverage completely for a property that is left vacant, whereas others will exclude only certain types of protection for an unoccupied house. For example, an insurer may refuse to pay a claim for damages caused by arson, vandalism or theft, as these types of crimes are more common among vacant properties. Similarly, water damage from a burst pipe may be denied because a homeowner was not present to notice the peril in a timely manner, leading to greater repair costs.
What Can You Do to Protect Your Rental Property when it is Vacant?
The most important step you can take to protect a vacant rental property is finding out exactly what your existing insurance policy covers and excludes when you are between tenants. A thorough review of your coverage may reveal that your coverage will change or even expire once the property has been unoccupied for a period of 30 to 60 days. Learning about these exclusions can help you be proactive about your insurance needs and find a policy that fits your needs whether your rental home is occupied or not.
Insurance endorsements are generally available to rental home owners who wish to keep their properties fully insured between tenants. These endorsements are generally affordable, with the unused portion of premiums typically considered refundable should you find a renter prior to the expiration of the policy. Vacant home insurance can include reimbursement coverage for the replacement value of a house, as well as liability coverage for landlords found legally or financially responsible for an injury sustained on a vacant property.
If you have a rental property that is unoccupied or will become vacant in the future, we invite you to contact our office and speak with an agent about your coverage. Our team can help you determine if you are vulnerable to vacant home insurance exclusions and assist you in finding the coverage you want to protect yourself against the unexpected. Call today for more information or to request your vacant home insurance quote. We look forward to serving you soon.