Occupied vs Vacant
In order to consider a home occupied, you need to ask yourself if someone is currently living there. Whether it be your primary residence, or a property that you are renting out to tenants, is that home being looked after 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?
Typically, this is a home that is not owner or tenant occupied for over thirty days at a time. This could be a home that is listed for sale, and you have moved out of, a home that you have recently purchased and are delayed in moving in, or a fixer upper that you plan on flipping over the next few months. Whenever I speak to clients, I always like to have them think about the same fire or water leak listed above. If a vacant home were to catch on fire, who is going to call the fire department? If there is a sudden water leak, who is there to shut the water off?
How does vacancy affect my policy?
When it comes to the world of home insurance, one of the largest risks is a vacant home. Typically, the home is not being monitored day in and day out, things are not being maintained on a regular basis, and we really have no way of knowing if something has happened inside the home if the owner has not been back in a week or two. It’s for these reasons that a vacant home is a much riskier endeavor in the eyes of insurance than an occupied home and must be written as a vacant dwelling policy.
What does vacant mean?
The general rule of thumb is that any property that is unoccupied for 30 to 60 days depending on your carrier is considered vacant. A home that is unfurnished will normally also be considered vacant. If you have a standard Homeowners insurance policy and have reached that time frame without occupying the home, your policy no longer provides coverage for the property. There are some potential exceptions, for example, if you are going on a long vacation, or maybe you need to go see family for a month or two at a time, it is important to notify your agent of these plans so that the insurance carrier knows that it is only a temporary leave, and the home is not permanently left vacant. Let’s take a look at an example of a potential claim situation that could arise from leaving your home vacant.
Example: A few years ago, I had a good friend reach out and let me know that he had inherited a house. He was in the process of selling the home and had a small fire in the kitchen of the house and was curious as to why his current carrier was denying the claim. After reviewing his policy, I found that it was a standard home insurance policy that made the assumption that someone was living in the home. Due to the fact the home was actually vacant his current provider declined the claim. This is a perfect example of the importance of updating the occupancy of a home with your agent so that you are covered when you need it.
What if my home is for sale?
If you are in the process of selling your home, you can ask yourself how this will impact your home insurance. The big question to ask yourself when it comes to selling your home is if you will be living in the home while it is being shown or if you have already moved into your new home whenever you begin the selling process. Let’s take a look at the primary differences in selling your home while living in it versus your home sitting vacant.
The main change we will need to account for is the increased foot traffic from showings. This presents a new risk for the insurance company and if a loss were to happen due to a showing, it could potentially be denied by the carrier. The best course of action if you are having showings in the home while you are occupying it is to call your agent to add an endorsement to account for this increased foot traffic during these showings. Many insurance companies will be okay 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.
Looking at the second scenario where the home would be considered vacant while selling it, we would need to call our agent to get a vacant dwelling policy in force. This would provide coverage for the home while it is listed on the market, but no one is living in it. As previously stated, whenever your home is sitting vacant on the market, your risk has completely changed. Besides the occasional showings there is no one there to watch over the house to ensure everything remains in good shape or call in a fire or ongoing accident. There is also a theft risk if the home still has furnishings or has other valuables in it.
How does home insurance work when I have an Airbnb/VRBO/Homeaway?
When it comes to owning and operating a short-term rental, it is important to consider the risks that are involved and cover them properly. Short-term rentals can be an eligibility concern with a lot of insurance carriers, so if you are considering starting one, you should consult your agent to ensure you are still eligible with your current homeowner’s policy. You will most likely need to add additional endorsements to make sure you a 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 to ensure that it is properly covered as well as confirming the insurance carrier is okay with short term rentals.
So, whether you are living in, moving out of, renting a home to others, or renovating a home it is of the utmost importance that you consult your agent and discuss the occupancy or rental terms to ensure that you have the correct policy form written for you, otherwise you could potentially have a claim denied.
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