Insuring a Vacant Home

by Michael on May 8, 2014

Photo of No Vacancy Sign

I’ve noted in the past that my parents are getting older and have experienced some health problems. Unfortunately, this has resulted in them having to move out of their house (my childhood home) and into assisted living.

And guess what? Insurance companies don’t like empty houses. Sure, we’ve kept the utilities on, we have a lawn service maintaining the yard, we’ve notified trusted neighbors (as well as the local police), and we check in on it from time to time. But that doesn’t make them more comfortable.

Vacant (or unoccupied) houses are at increased risk of loss due to leaky pipes, fire, vandalism, squatters, theft of copper pipes, etc. Not surprisingly, insurers are thus reticent to maintain coverage without special arrangements.

This usually involves the addition a vacancy endorsement (or rider) or even a separate policy. In other words, you have to pay more to offset the increased risk. As with all insurance-related topics, the details will vary by insurer and state, so be sure check with your own agent or insurance company.

What follows are some generalities based on our recent experiences.

Vacant? Or unoccupied?

For starters, you need to define your terms and clarify your insurance company’s policies. For example, some insurance companies follow a dictionary definition of “vacant” whereas others look at whether or not it’s occupied.

va•cant: having no fixtures, furniture, or inhabitants; empty.

un•oc•cu•pied: not inhabited.

See the difference? A vacant home is an empty home — devoid of both furnishings and residents. An unoccupied home may be furnished and livable, but has nobody living there. Some insurers worry about totally empty houses, while others worry about houses without residents.

In our case, the insurance company is concerned about occupancy (or lack thereof) as opposed to vacancy. In other words, if my parents are not able to “take care and custody” of their home for an extended period (30 days in this case), then their standard homeowners coverage no longer applies.

If their pipes burst or their house burns down, any insurance claim would likely be denied. Not good. So how do we rectify the situation? Here again, the answer likely depends on your insurance company and your state of residence.

Maintaining insurance coverage

In our case, we can pay a one-time fee to add a “vacancy endorsement” — but with a caveat. The endorsement only lasts until the end of the current policy term, at which time we’ll need to convert it to a more costly “rental dwelling” policy (which treats it like an unoccupied rental unit) or they’ll cancel our coverage.

Fortunately, their have an annual policy and it’s due for renewal this month. We’ll thus add the endorsement and be good to go for the next year. But if we don’t get it cleared out and sold between now and then, we’ll have to change the coverage.

What about their belongings?

Something I hadn’t really considered is the coverage of their belongings while they’re in assisted living. With the vacancy endorsement in place, their homeowners coverage will remain in full force and the house and its contents will be insured.

But what about the stuff they have with them? As it turns out, as long as their homeowners coverage is in place, their belongings are insured even if they’re physically located at the assisted living facility.

But once we sell the house (or convert it to a rental dwelling policy) their homeowners coverage will stop and they’ll need a renter’s insurance policy to protect their belongings. Makes sense.

P.S. Yes, we previously went to the trouble of creating a life estate deed for the house (for Medicaid planning purposes), but we’re re-considering and thinking of selling to simplify things. More on this in the future…

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