Home Insurance Vacancy Clause
Your home insurance has a clause about vacancy; do you know when it applies?
If you are facing a situation where your insurance company has told you that you need a vacancy permit, or that they need to change your insurance because you have a vacant home, you are not alone. It is a common problem that people face, and there are ways to deal with it. A lot of people get really upset when dealing with a vacant home because the insurance company changes the conditions of the insurance and start to ask a lot of questions, or ask you to fill in a vacancy questionnaire before giving you the insurance.
You'll need to understand why the home is being considered vacant, and make sure you are well informed about the changes that will happen on your home insurance policy once it is vacant, lets go over the basics of vacant homes and insurance here so you are prepared to make the best decisions to protect the property and your investment while the home is vacant.
Vacancy Permit Definition
A Vacancy Permit is an endorsement added to a homeowner policy that extends your home insurance to maintain coverage and insure the property while it is vacant. A vacancy permit usually is issued for a specific length of time and reduces coverage to your insurance. A home is considered vacant and requires a vacancy permit on the insurance policy when the inhabitants of a home are no longer living there and have no intention to return, or when a home that is newly purchased has not yet been inhabited. A vacancy permit is useful to ensure that your home remains insured during the period of vacancy.
You will need to complete a vacancy permit questionnaire to request a vacancy permit. Without a vacancy permit, a vacant home may be uninsured due to the exclusions on a homeowner policy and claims may be denied.
How Does a Vacancy Permit Change My Home Insurance Coverage?
It is important to understand that the vacancy permit alters the insurance contract coverage.
A vacancy permit will limit coverages or reduce coverage as a result of the new status of the home because insurance companies perceive a higher risk when a home is not occupied. If you had an all risk or open perils homeowner policy, it would be changed. Vacancy permits will usually restrict coverage to the basics, like fire and eliminate important coverages like water damage among others. If you do not have a vacancy permit and your home is vacant, then your home may become completely uninsured and any claim happening during the time of vacancy may be denied.
When is a Home Vacant?
The definition of vacant for insurance purposes is straightforward. A home is considered vacant when there are no inhabitants. However, it can be confusing to understand because of all the different circumstances that cause vacancy. Here is a solid definition, followed by examples, that should help put the meaning of the term vacant into perspective, so you never end up with an uninsured home due to a vacancy.
Vacant Home Definition
The definition of being vacant is when:
- it is newly purchased, or a is new construction, and the inhabitants have not yet moved in.
- when the inhabitants of the home have left and have no intention to return, regardless of whether the home is furnished or not, or the reason for the departure. The moment inhabitants will not return to live there; it is vacant.
Examples of When a Vacancy Permit is Required
Every homeowner and condo policy has a clause in it that specifies the length of time a home may be vacant before it is uninsured. Insurance policies also specify that as a condition of the insurance, the insurance must be advised any time there is a material change in the risk. A change in occupancy is one of these changes.
Generally, depending on your insurance company the requirement for a vacancy permit could start once the home is considered vacant for 30 days.. You need to contact your insurance representative or agent to verify the exact requirements for your insurance policy since each company is different. There are many different circumstances when you may need a vacancy permit, in general, it is when the definition of vacancy has been met, but you still need to insure the property.
A New Home
If you just purchased a new home, the home is vacant until you move in. Normally, this will be within a few weeks of the date of purchase, and so a vacancy permit is not usually required because the term of vacancy falls into the acceptable term for which the home may be vacant according to your home insurance policy wording. However, if more than a few weeks will go by before you move in, you need to discuss this with your insurance company to see if you need a vacancy permit. Any time you will buy a new home and not move in immediately, you need to advise our insurance agent, so they make sure you have the right insurance.
Example: Christina is moving to New York for her job, but will only be transferred in 4 months. To get ahead of the game, she started house shopping early and was lucky to find the perfect new home. It was Christina's first home insurance, so she didn't really understand what difference it would make when she would move in. Luckily her insurance broker asked her about her plans for the move and advised her that since she would not officially be moving in for several months, they could get a vacancy permit by filling in the questionnaire. The cost was a little more, but this protected Christina's investment and made sure she was insured until she moved in.
When a Home is for Sale
Sometimes people buy a new home and move into the new home before the old one is sold. While the other home is on the market because the inhabitants have moved out with no intention to return, the home is therefore vacant. It requires a vacancy permit.
Insuring your old home and your new home with the same insurance company may grant you additional negotiating power with your insurance company or advantages that will make the process of insuring your vacant home easier.
For an Estate or Due to the Death of the Primary Insured
One of the most difficult situations is when a home is left vacant due to a death, and the family members have to deal with the insurance. When the primary named insured or the inhabitants of a home are deceased, the home is considered vacant because the inhabitant has no intention to return.
If the primary named insured is deceased, but other family members are still living in the home, the insurance company may consider maintaining the home insurance as a normal policy for a specific time frame when the other residents were living there all along. For example, if a mother dies, and adult children are living in the home, then the situation has remained the same, so the home is not technically vacant, the home policy will be changed to the name of the estate and the inhabitants may be able to continue to live there insured as they were before the death for a time frame determined by underwriting. However, the insurance company must be advised so they can make the changes or else the insurance policy may not pay out in a claim due to a material change in the risk.
What Happens if a Home is Vacant, but There is No Vacancy Permit?
If your home is vacant according to the terms and conditions of your home insurance policy, and you do not advise the insurance company and get a vacancy permit, even if you "didn't know" or forgot to tell them, you can have a major problem because your contract is specific in that it does not cover vacant homes. Even if you have a binder of insurance showing your home is insured, it does not matter if it does not specify that you have a vacancy permit on it. If your home is vacant and you have a claim, and you did not have a vacancy permit your claim could be denied, and your insurance contract may be considered null and void. You must speak to your insurance agent or insurance company any time your situation changes (known as a material change in the risk) for your property. Do not leave yourself uninsured.
How Much Does a Vacancy Permit Cost?
According to the Insurance Information Institute, a vacant home could cost twice as much if not more than a regular homeowner policy. The vacancy permit is a temporary solution and will include a change in premium for the term of the permit. It is frustrating to many people because they see a reduction in insurance coverage during a vacancy, yet sometimes pay more. Some insurance companies have options that do not cost as much, but it depends on your insurance company. If you see really high rates, you might want to shop around, especially if this is something that may not be resolved quickly. The long-term goal should be to get the home occupied or sold as soon as possible to save money and eliminate your risks.
Why is a Vacant Home a Problem for Home Insurance?
The incidents of claims and potential things that could go wrong with a vacant home as far greater than those in a situation where someone is living in a home full time. When a home is vacant, there is a greater risk of theft, vandalism, fire and all kinds of damage. When no one is present to see what is happening in a home or to notice when things go wrong, it makes sense that the risk is higher for a claim or damage to happen.
Are Contents Insured Under a Vacancy Permit?
If you need contents insured under the vacancy permit, make sure to mention it to your insurance company, there may be an additional charge depending on your circumstance.
How Long is a Vacancy Permit in a Vacant Home Good For?
Vacancy permits are usually issued for up to 90 days. Each insurance company will review a vacancy according to their own terms; each company is different. The insurance underwriters will review the situation to decide if they will offer additional accommodations or they might tell you that they are going to "get off the risk" which means they will provide notice to cancel your insurance policy.
What Will Happen When the Vacancy Permit Expires?
If the insurance company is no longer willing to insure the home as vacant, then your agent may suggest that you go to a specialized high-risk insurer if the term of vacancy seems to be lasting too long. Home insurance policies are not structured to insure vacant homes, so once the status of vacancy is the norm, it is usually time to move to a vacant home insurer. You can contact your state insurance commissioners office to find out what your options are if your insurance broker or agent cannot offer you Vacant Home Insurance.
How to Get a Vacancy Permit for Home Insurance
Contact your insurance agent and discuss the situation with them. They will need to have a lot of information to present the change in your home insurance situation to the underwriters at the insurance company so that they can approve the vacancy permit. The insurance company will underwrite the risk and in most cases will approve a vacancy permit so that you can maintain basic coverages, like fire coverage, while your home is vacant. It is important to provide all the information possible to your insurance representative so they can get the best conditions for you and make sure you remain insured.
10 Questions You Will Be Asked on a Vacancy Permit Questionnaire
Although every insurance company is different, there are some basic questions you can expect to be asked by your insurance agent or representative when you require insurance on a vacant home.
- The date of vacancy & how long vacancy will be for (if the information of how long the vacancy will be for is unknown, the underwriter will likely give a 90-day term, the situation will be re-evaluated closer to that time if the home is still vacant)
- The reason for the vacancy (for example, is it due to a death, purchase of a new home, that you're moving to another state, etc.)
- If the home is furnished - will you need contents insurance?
- If there are any alarms or security in place at the home
- If there are coverings on the windows
- If anyone is picking up the mail and maintaining the property, so it looks lived in; your insurance company may also ask you for photos of the property to understand better how the property appears.
- Who is responsible for the maintenance of the home
- What is the relationship of the person visiting the home to the homeowner
- How frequently the person will visit the home (for example, is it daily, weekly, etc.)
- What are the plans for the property (is it for sale, when will someone move in, etc.)
These questions are used to help underwrite the risk and obtain a vacancy permit.
How Will a Vacancy Permit Change My Insurance Coverage?
In addition to restricting coverage or reducing coverage to very basic perils, the vacancy permit usually restricts coverage such as liability to the premises and does not usually include contents. So If you are preparing to request a vacant home insurance, it is a good idea to have this information ready, and you could even email it to your insurance representative to get the process started.
Your Responsibilities When You Have a Vacancy Permit
Once the underwriter reviews all the information, they may require you to add an alarm system or take other suggested precautions to protect the property if they feel there is a risk. If you meet all their conditions, or the circumstance is reasonable to the underwriting department, they will issue your permit for a specified length of time. During this time if anything changes in the circumstance, you must advise the insurance company or else you may not be insured.
If the insurance company wants to do an inspection, be as cooperative as possible, this may be a requirement in certain circumstances.
Keeping open communication with your representative and answering any questions they may have will make them feel comfortable with the risk and will give you the best chances of keeping the home insured for as long as possible. Sometimes if the 90 days go by and the home is still vacant, then the underwriting department and your insurance representative will review the situation and decide if they offer you an extension. Your cooperation with them and forthcoming communication will help you greatly.