Vacancy Clauses in Insurance Contracts

This has been an increased topic of discussion over the past few weeks with clients so I figured we could touch on this a bit...

The definition of a "vacant" property can vary from carrier to carrier so I will start by urging you to either consult your agent or your policy to determine the parameters of your individual contract.

Most companies will deem a property vacant after a period of 30 to 60 CONSECUTIVE days of being uninhabited. Once a property has been determined to be vacant, there is an outline as to reductions of coverage or even removal of coverage.

Specific coverage that may be limited or removed are:

-Water

-Vandalism/Malicious Mischief

-Theft

-Glass Breakage

For instance, one policy we reviewed removed ALL water damage coverage after being vacant for 60 days. This same policy reduced all other covered losses(wind, hail, fire, etc.) by 15% if vacant at the time of loss. On the other hand, another carrier states that coverage listed on the declarations page is reduced to 60% if vacant for 30 days or more, period. 

If you know a property will be vacant for a period of time, THAT IS OKAY! There are carriers that will provide coverage on a vacant property, typically at a higher rate, so that remodels, repairs, etc can be made without the worry of a reduction in coverage. Policies can be written on temporary basis such as 3, 6 and even 9 month terms. There are many different options as long as you are proactive.

Like I said, consult with your insurance agent and make sure you have an understanding of your policies so when it comes time to file a claim no one is in the dark. Vacancy clauses are one item that investors may not think of until a situation comes up. Feel free to visit our website for more information: https://jtpins.com/business-insurance/landlord-insurance