While the occupancy of your home may seem like an afterthought, it is one of the biggest questions insurance companies need answered to write the correct policy for you. If occupancy is not accurate, it may result in a denied claim. In this article, we’ll explore the difference between an occupied and vacant home and how those scenarios affect your policy.
Occupied vs. Vacant
When it comes to home insurance, one of the insurance company’s largest risks is a vacant home. The main factor insurance companies need to know is if the home being cared for on a day-to-day basis. For example, if a fire were to start or a sudden water leak happened, would there be someone there to take immediate action and help mitigate a loss? It’s for these reasons that a vacant home is a much riskier endeavor in the eyes of insurance companies than an occupied home and must be specially written as a vacant dwelling policy.
Occupied
In order to consider a home occupied, someone needs to be currently living there, regardless if it’s the homeowner or a renter. If you have a standard homeowners insurance policy and the home flips from an occupied to a vacant classification, your policy will no longer provide coverage for the property.
Vacant
Typically, this is a home that an owner or tenant has not occupied for over thirty days at a time. This could be a vacant property listed for sale, a home you have recently purchased and are delayed moving into, or a fixer upper that you plan on flipping over the next few months. A home that is unfurnished will usually also be considered vacant.
Temporary Leave
There are some exceptions, for example, if you are going on a long vacation or you need to visit family for a month or two at a time. It is important to notify your agent of these plans so that the insurance company knows your situation is a temporary leave and the home is not permanently left vacant.
What if my home is for sale?
Your insurance company wants to know if you will be living in your home while it’s on the market. Let’s take a look at what you need to consider if you’re selling your home while living in it versus letting your home sit vacant.
Occupied
There will be increased foot traffic from showings, which presents a new risk for your insurance company. If a loss were to happen during a showing, insurance could deny a claim. If you’re occupying a listed home, call your agent to add an endorsement that will account for increased foot traffic. Many insurance companies will be fine with the added risk, but some will not. It’s best to be safe and make your agent aware so you can ensure you have the right coverage.
Vacant
In a vacant home situation, you should work with your agent to secure a vacant dwelling policy in force. This would provide coverage for the home while it is listed on the market and no one is living in it. This policy will cover accidents and theft if the home still has furniture and valuables in it.
Let’s take a look at an example of a potential situation that could arise from leaving your home vacant:
Example: A couple inherits a house, and they intend to sell it. In the listing process, there was a small fire in the kitchen. The insurance company denied the couple’s claim. This is because they had a standard home insurance policy on the inherited house that made the assumption someone was living in the home.
How does home insurance work when I have a short-term rental?
If you own and operate a short-term rental, consider the risks involved and cover them properly. You will likely need to add endorsements to make sure you’re properly protected in the event a claim arises from your short-term rental. If you are renting out a dwelling that you are not currently occupying, you will need to get a dwelling policy and confirm the insurance carrier is okay with short-term rentals. Learn more about understanding short-term rental insurance as a property owner.
Whether you are occupying, moving out of, renovating, or renting a home to others, you should consult your agent and discuss your policy’s occupancy or rental terms to ensure that you have the correct coverage. Otherwise, you risk having a claim denied because this detail was not specified.
The contents of this article are meant as general information to help you understand personal lines insurance and not specific to a particular policy. Policies, coverages and discounts can vary by state and insurance carrier. To understand your coverage, you should speak directly with a licensed insurance agent or read your full policy contract. Call your agent or contact us at (833) 779-4090.
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