The so called “silver linings” to any problems in these harsh economic times are certainly few and far between.  One silver lining in the insurance world however, is the increased focus and understanding of insurance coverage for vacant homes.  Prior to the bottom falling out of the home market and the resulting sheer number (and resulting publicity) of vacant homes, insurance for vacant homes was rarely properly written and very misunderstood.  The need for solutions for covering vacant homes is now so significant that insurance carriers and agents have been forced to deal with the issue head-on and either provide clear solutions or decline writing vacant homes.  There has been a gain in the general understanding of what defines a vacant home, what coverages are lost when a home is vacant and understanding the available solutions, but there is still significant confusion.  Hopefully this discussion will help clarify how to handle insurance on a vacant home.

What is the issue?

When a home is vacant (defined as unoccupied for more than 30 to 60 days depending on the carrier) several significant coverages disappear under a homeowners policy.    These coverage eliminations include coverage for glass breakage, pipes freezing and vandalism.  Glass breakage and vandalism are certainly a concern but the largest potential for loss is pipe freezing.  Water damage claims due to pipe freezing are rarely small.  This type of claim routinely totals more than $50,000.   It is important to note that carriers do not consider a cabin or vacation home to be vacant.

What are the solutions?

The most efficient means of solving the issues outlined above is to get your homeowners company to state, in writing, that your home is not considered vacant.  Many carriers will agree to this if, a.) you leave some personal property in the home and b.) you are checking on the home at least every two weeks.  If you feel you qualify, call your agent, explain the situation and have them secure a written statement from the carrier that your home is not considered vacant. 

If you are unable to accomplish the process described above, purchasing a vacant home policy is your next best solution. There are issues to be aware of however.  Most vacant home policies are written on a DP1 basis which means only specific types of losses are covered.  The DP1 is not nearly as broad as a basic homeowner’s policy.  For example, theft of items that are actually part of the building, such as copper tubing, is not covered under a DP1.    Also, you will need to actually add vandalism coverage to the policy as it is not automatic,  and DP1s severely limit coverage for contents and other structures on the property.  Finally, and perhaps most importantly, many vacant home policies will not cover bursting of water pipes.

Even when the economy improves, , covering vacant homes will remain a confusing issue.  Be careful and make sure that your home is properly covered and that you are fully aware of any significant coverage restrictions.

Posted 3:40 PM  View Comments

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