Vacant Homes and Homeowners’ Insurance
As promised last week (and delayed), the following is written by David Jenkins, an insurance agent with Liberty Mutual in Charlottesville*. meant to answer the question raised when I was last on Charlottesville Right-Now with Coy Barefoot.
Vacant homes are a concern for insurance companies. Homes that are vacant are at higher risk for several things, such as vandalism and theft. A leaking pipe that otherwise would not be much trouble could turn into a big problem if left unattended. The first thing a homeowner needs to do is call their insurance company before the house becomes vacant to go over the different options they have.
If the company is not notified, the policy could be cancelled if they find out, and a claim could be denied because of this as well. Each insurance company has their own guidelines in regard to vacant houses. Their current policy may be extended, but it could cut back on some coverages, such as vandalism or theft. An insurance company may write another policy specifically for vacant houses. This policy usually does not cover as much, but will still cover the house itself as well as liability. It has the potential to have higher rates, but could cost the same as the current home policy or maybe a little less. The policy could also be cancelled. It depends on the insurance company and the situation.
Overall, the most important thing is to call your insurance company, ask questions, and try to work together. Ask what is their procedure on vacant homes. What’s covered and what is specifically excluded? Does another policy have to be written? Is there a time limit on the coverage of the vacant home?
Be prepared to answer a few questions yourself too, such as why will it be vacant? How long will it be vacant? Will anyone be watching over or checking on the house? If the home is for sale and it doesn’t sell within a certain time, do you expect to rent it out? Generally, the person’s current insurance company will want to insure the new house as well. The company usually won’t want to insure the higher risk home without the benefit of insuring the new home.
*with slight editing by me, particularly the bolding
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From an anonymous commenter -
I’m in the process of purchasing a foreclosure with and for my mother. In the “Memorandum of Foreclosure Sale”, bolded and underlined states the following:
“The risk of loss from fire, casualty, condenmation actions, whether or not notice was given posting the property or otherwise, or other causes of loss, and all liabilities of ownership of the property pass to the Buyer upon execution of this Memorandum of Sale.”
My insurance agent balked, but my attorney convinced him that I should have a policy in effect, immediately, prior to closing on the property.
Its an interesting situation - I don’t own this vacant house, have no legal right to occupy or even step foot on the property, but I have liability. There are trees down from the hail storm (high winds in this particular subdivision that day). But wait, it gets worse - there’s an above-ground pool, full of water with no fencing around it. There are neighbor’s kids everywhere.
In the end, my insurance agent wrote a policy with a $5000 deductible, only $100,000 in limit coverage until I own the property, at which time I have to cure some of the issues that are evident and he will rewrite it with appropriate coverage.
Post script: A tree guy analyzed the danger, concluded none, but is the first one on the property - day after we close. The pool managed to find itself a leak, draining it and relieving some worries on my part that a child was in danger. I have no idea how it got those two huge holes, allowing it to drain on its own. Sure was lucky, though.
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