Leased, Vacant and Unoccupied Homes Require Special Coverage

By Richard A. McGrath, CIC, LIA

Imagine having a fire or other tragic loss in your home and finding out that it is not covered by your homeowner’s insurance.

It can happen if your home is not properly insured for its current use.

Just about everyone knows they need homeowner’s insurance to protect their home.  It’s a requirement for obtaining a mortgage.  But sometimes standard homeowner’s insurance is not sufficient.  What if you own a second home and rent it out?  Or what if you own a home that is vacant or unoccupied?

How you insure your home is affected by many factors – and failure to pay attention to details can result in otherwise-legitimate claims being denied.

Leasing a second home

If you own a second home, but lease it for part of the year, it is essential that you notify your insurance company and let your carrier know when the home is being rented.

Renting instead of selling

In today’s housing market, many homeowners who wish to sell their home are instead renting it out to avoid taking a loss on a sale. Most homeowner’s policies provide coverage as long as the owner occupies the dwelling.

If the home is being rented out for an extended period of time, major changes need to be made to provide proper insurance coverage.  A dwelling fire policy should be in place under these circumstances.  The cost may be slightly more, but the proper coverage will be in place to adequately protect you.

In such cases, a landlord should purchase a commercial insurance package policy.  A landlord’s commercial insurance package policy covers the property owner’s building and personal property, such as appliances and furniture, and possibly up to 12 months’ worth of lost rental income.  In addition, it typically covers legal fees and liability protection for bodily injury, and property damage due to the landlord’s negligence.  The policy may also cover the tenant’s medical costs.

An umbrella liability insurance policy should also be considered to provide additional liability protection.

Insuring an unoccupied or vacant home

Homes typically become vacant during a move, of course, and vacancy is almost always a temporary condition.  Today, though, the large number of foreclosed homes on the market has contributed to drive the overall vacancy rate up to 11.4%, according to the U.S. Census Bureau.  Given today’s housing market, vacancy can last a year or longer.

Typically, an insurance company will provide a window of 30 or 60 days for the owner to find an occupant, after which homeowner’s insurance will be canceled.  Failure to notify the insurer when a home is vacant will jeopardize the coverage protection and leave the homeowner with no coverage in the event of a claim.

Some insurers are willing to provide a vacancy insurance policy that continues coverage against fire, wind and other standard claims, but it does not insure the house against other common claims, such as theft, glass breakage or water damage.  What a vacancy policy covers varies, so homeowners should consult with their insurance agent.

Your insurance company may be more flexible and allow you to continue coverage if you are moving to a location that is close enough so that you can regularly check on your home.  Theft, vandalism, fire and water damage are far more likely to occur when houses are vacant, and the damage is likely to be worse because no one is around to report it or stop it.

Take security precautions, such as installing a central alarm system, deadbolt locks and smoke detectors.  Winterize your home to keep plumbing and heating fixtures from freezing.

Another option is to have someone you know and trust stay in your home.  Hire a house sitter or property manager to check on your property regularly to avoid the possibility of a major claim.  Especially during the winter months, a majority of vacant or unoccupied property claims are from water damage due to frozen pipes.

In protecting a vacant home, “an ounce of prevention” can truly be worth “a pound of cure.”


Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass.  He can be reached at rmcgrath@mcgrathinsurance.com.

This article is written for informational purposes only and should not be construed as providing legal advice.

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