insurance

Insuring your vacant home

Highlights
  • Homes for sale languish, creating insurance issues.
  • Homeowner's insurance may not cover damage to vacant property.
  • Endorsement or separate policy often required for full coverage. 

In today's sagging real estate market -- where homes often remain unsold for months on end -- sellers sometimes have no choice but to move and leave their properties vacant for a time.

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Those owners might be surprised to learn that an insurance provider could drop their homeowner's policy coverage. That's because empty homes are riskier to insure, according to insurance experts.

A vacant house is an "attractive nuisance" that appeals to vandals and thieves, says Michael McRaith, director of the Illinois Department of Insurance in Chicago.

Vacant homes also present numerous liability issues, says Pete Moraga, a spokesman for the Insurance Information Network of California, a nonprofit consumer education organization that represents various insurers.

"Kids climbing over a dilapidated fence could get hurt, or teens partying in a vacant home could fall and slip," he says.

Homeowners looking to insure a vacant home typically have two options: buying an endorsement to their existing homeowner's policy or purchasing a separate vacant-home insurance policy.

Silence is not golden

If your home is soon to be vacant, it may be tempting to leave the property without notifying your existing insurance agent of the change in the home's status.

But simply hoping an existing homeowner's policy will cover you in such circumstances could be a mistake, Moraga says.

"Most policies have exclusions for 'neglect' or 'abandonment of property,'" he says.

A vacant exclusion generally kicks in after a home has been empty for 30 or 60 days.

"If a homeowner is not living in the home and does not notify their insurance agent or company that the home is sitting vacant, any claim for property damage or liability under the homeowner's insurance policy could be excluded or constitute insurance fraud," Moraga says.

Laws vary by state, and restrictions vary by insurer. So homeowners must understand an existing policy's terms prior to a change in status. Talking to an insurer can help you discover coverage options.

"The time to talk to your insurer is before you move," Moraga says.

Insurance options

In some cases, insuring a vacant home is as simple as purchasing an endorsement to the existing homeowner's policy.

State Farm Insurance in Bloomington, Ill., is one company that offers such an endorsement, says Dick Luedke, a spokesman for State Farm.

A State Farm standard homeowner's policy no longer covers certain types of damage once a home becomes vacant, Luedke says.

"After the home is vacant, we do invoke an exclusion for vandalism and glass breakage, and that applies after it's been vacant for 30 days," he says.

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However, by purchasing an endorsement, homeowners "buy back" that exclusion. According to Luedke, the cost for such an endorsement is usually under $100, and coverage lasts for the duration of the policy period.

Not every insurance company offers such endorsement. If an endorsement is not available, consider purchasing a vacant-home insurance policy, says Jim Gontjes, a regional product manager for Foremost Insurance in Caledonia, Mich.

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