Vacant Home Insurance: Do You Need It? What Does It Cover?
Homeowners insurance protects your primary residence from financial losses caused by theft, fire, and other covered perils. If you own a vacant home for an extended period of time, you may be wondering if your policy will still cover the property if damage occurs. It is possible that your standard policy will not cover a property that is not occupied. To fill a coverage gap, you may need to purchase a vacant home insurance policy.
What Is Vacant Home Insurance?
To determine whether you require vacant home insurance, you must first understand what it is and when it may be required. Vacant home insurance can be purchased as a standalone policy or as an endorsement to an existing homeowners policy. It is intended to safeguard homes that have been vacant for an extended period of time. This is distinct from traditional homeowners insurance, which covers you for the duration of your ownership and residence in the home.
The time it takes for a home to be considered vacant can vary depending on the insurance company. Some insurance companies, for example, may consider a home vacant if no one lives in it for at least 30 days. Other insurers may allow up to 60 days before a home is considered vacant.
- Insurance companies distinguish between vacant and unoccupied homes. If your personal belongings are still inside and you could return to live there at any time, a home is considered unoccupied rather than vacant.
What Does Vacant Home Insurance Cover?
Vacant home insurance is intended to provide similar protections to a standard homeowners insurance policy. For example, your vacant home insurance policy may cover damage caused by things like:
- Theft
- Vandalism
- Fire
- Explosions
- Wind
- Hail
- Lightning
Your policy should include a comprehensive list of covered perils as well as any exclusions from coverage. Vacant home insurance can cover the most important types of damage that can occur when a home is not occupied, but it does not cover everything. If your home is in a flood plain, you may need to purchase flood insurance separately.
Depending on the insurer, vacant home insurance policies can have terms ranging from three to twelve months. Your insurance company may have specific requirements for the types of homes that can be insured. For example, you may be able to obtain vacant home insurance for up to four units or be limited to insuring a single-family home. Insurers consider how the house is used and why it is vacant, as well as its age, overall condition, and estimated replacement value.
A vacant home poses a greater risk to insurance companies than a home that is occupied full-time. Because there is no one to keep an eye on the property, it is more likely that vandalism or other mischief will occur. Furthermore, without regular maintenance and upkeep, the risk of water and fire damage increases. Needing vacant home insurance for an older property or one that was not properly maintained before you bought it may raise your risk profile and premiums.
Who Needs Vacant Home Insurance?
Vacant home insurance is typically only required in situations where a home you own will be vacant for an extended period of time. Some of the circumstances that may necessitate vacant home insurance include:
- Selling a house you no longer live in because you've moved to a new one
- Having a vacant rental property during the off-season
- Performing extensive home renovations or repairs that render it temporarily inhabitable
- Being admitted to a hospital for an extended period of time for medical treatment
- Having a vacation home that you only use for a few months a year
If you are on active duty in the military or traveling for an extended period of time, you may also require vacant home insurance. However, keep in mind that for a home to be considered vacant, it must be completely empty of all personal belongings.
- Inquire about refund policies if you have to cancel your coverage before the policy expires when purchasing vacant home insurance. If you cancel your coverage early, some insurers will refund your premium payments.
How to Purchase Vacant Home Insurance
Before purchasing vacant home insurance, consider whether you need a separate policy or whether an endorsement to an existing homeowners insurance policy will suffice. An endorsement can be used to add temporary vacancy coverage to an existing policy. Assume you own a rental property and your tenant has given you notice. You anticipate that finding a replacement tenant and getting them moved in will take a month or two. You may be able to use an endorsement to change the coverage of your current policy until the home is occupied again.
The next step is to compare vacant home insurance policy rates and coverage options. Every insurance company is unique in terms of things like:
- Property types
- Vacancy reasons
- Covered and non-covered perils
- Coverage limits
- Deductibles and premiums
- Coverage terms
- Definition of status (for example, "unoccupied" versus "vacant").
The cost of vacant home insurance varies depending on the insurance company and the specifics of your policy. A four-unit rental property will almost certainly cost more to insure than a single-family vacation home. Obtaining quotes from multiple insurance companies can assist in locating an affordable policy.
There are some things you can do to lower the risk profile of the home and help make a vacant home policy less expensive. Installing smoke alarms, carbon monoxide detectors, and/or a security system may qualify you for insurance discounts. Having someone take care of outdoor landscaping and maintenance or check on the house on a regular basis may also help reduce the risk to the insurer and lower your premiums.
When purchasing insurance for a vacant home, think about how long you'll need it. This can be difficult if your house is on the market and you're waiting for a good offer. If you plan to rent out a vacant home, check with your insurance company to see if the policy can be converted to a landlord policy once the property is occupied. These pointers can help you avoid paying for more coverage than you need or the incorrect type of coverage.
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