How To Insights | Secure vacant property insurance
ALIGNED Explainer | Renting out a condo using Airbnb? Interviewing potential lessees for your strip mall, office building or warehouse? You may be planning to relocate into your rental property, doing renovations or simply waiting for the perfect long-term tenant to sign a multi-year lease. If you own a building that you rent, chances are that it will be either unoccupied or vacant for a short or extended period of time.
While you may be an experienced commercial and/or residential landlord, you may not be aware that typical property coverage can be voided if a property is left vacant or unoccupied for as few as just four days! That means that if you use online services to rent out your cottage or chalet, a vacancy of more than four days could put your investment property at risk.
Insight: Due to increased risks associated with vacant and/or unoccupied property, a typical vacant property policy is one and a half to three times the cost of regular property insurance coverage.
Regardless of why your property is vacant, you need to connect with your insurance broker and have them formally advise your insurance company of any planned vacancy that will last more than 96 hours. A separate insurance quote for vacant buildings isn’t always needed. However, it is important that your insurer is made aware of the vacant property and can either confirm coverage or advise vacant property insurance is required.
How to ensure your vacant property is fully covered
From a statistical perspective, vacant properties are inherently more susceptible to risk. Damage that results from vandals, undetected repairs, fire as well as other losses are some of the most frequent risks unoccupied properties face.
Related Matters: City of Vancouver: 2019 Empty Homes Tax Information
As well, your existing commercial property insurance may specifically exclude coverage because of the vacancy. A vacant property can pose a serious risk to your bottom line. Vacant property insurance is designed to fill a key gap as well as cover common unoccupied property risks including:
- Explosion
- Fire
- Hail, lightning or windstorm damage
- Malicious mischief on the property and general property destruction
- Squatters on the property who cause damage without the owner’s knowledge
- Sprinkler leakage
- Vandalism
Yes, you can manage vacant building risks. Here’s how:
- Advise your insurance broker or insurer that your building is going to be unoccupied. Most insurance policies have conditions on vacant or unoccupied buildings.
- Deal with controllable elements. Decide if you will maintain heating while the premises is empty. If you decide to not maintain heat, make adjustments to infrastructure such as plumbing to minimize potential for damage as a result of changing seasonal temperatures.
- Maintain the fire protection system and ensure it is in working order.
- Minimize vermin infestations with professional pest and vermin control.
- Protect your property. Include security, vandalism, theft and damage protection.
- Secure the physical building with temporary fencing, board up ground floor windows and block entry points.
Situations When Your Residential Property May be Considered “Vacant”
- Major Renovations If you’re planning an extensive home renovation project on your primary residence and are going to be staying elsewhere while the work is being done, it’s best to notify your insurance broker. Your policy may allow for the issuance of a temporary permit. Otherwise, purchasing vacant property insurance strictly for the duration of the project keeps your property insured while you’re not living there.
There may be a cost involved but the peace of mind is well worth it. Properties under renovation are attractive targets to thieves looking for premium fixtures and appliances they know are likely going into a major home reno. And with nobody home, their job is that much easier. Your vacant property insurance coverage can let you rest easier knowing that your home is protected while you’re not there.
- Rental or Investment Property Chances are there will be a period of time when your rental property will be empty. This could be due to repairs or for the time between tenants. Considering that landlord/tenant laws generally make it difficult and time-consuming to evict a tenant, finding the right tenants is not a process to be rushed. It’s better to leave your property vacant than to rent it to the wrong person(s). The cost of vacant property insurance is money well spent in this regard. The small amount you pay to cover your property until you find a tenant you’re comfortable with could end up saving you a lot more money, and headaches, down the road.
If you’re “flipping” a house, having vacant property insurance is a must. Like a primary residence that’s empty while under construction, an investment property that’s undergoing a major upgrade is a prime target for thieves and vandals. Unlike your primary residence, your investment property has been on the market with a “For Sale” sign planted in the front yard, catching the notice of those with bad intentions before you purchased it.
- Going on Vacation or Extended Absence from Home If you plan on going away for an extended period of time, it’s wise to contact your broker and let them know, in case the length of your trip or absence would exempt coverage.
- A Vacation Property Vacation properties that are only used seasonally require their own specialized coverage as they are at higher risk of prolonged and undetected damage, especially during winter months. Unfortunately, burst pipes that cause weeks or months of water damage are all too common in cottage country.
Vacant property insurance is for when you are at your vacation property and your primary residence is empty. The good news is that you may be able to save money by bundling insurance coverages for both properties. Contact an ALIGNED Advocate to get a free no-obligation quote.
- Selling your Home It’s not uncommon to move out of your home and into a new one before it’s sold. If so, advise your broker and make sure you have insurance coverage for your vacant property. As we’ve discussed, an empty home is all too susceptible to break-ins, theft and undetected damage that could leave your home unsellable.
What can vacant property insurance cover?
Any property that is empty, infrequently used, seasonally inhabited and/or periodically rented may or may not be “unoccupied”. Usage frequency is important to accurately gauge when you are looking at coverage options. Understanding vacancy – from the insurance company’s perspective – is key when you want to buy coverage for a property that may not always be 100% occupied.
Related Matters: The Globe and Mail “Is your home or income property insured when it’s vacant?”
Here are a few coverages to look for when you are reviewing vacant property insurance options:
- Broad Form Perils
- Replacement Cost Insurance (if desired)
- Sewer Backup
- Vandalism
What starts out as an occupied property may change over time. If your company is moving operations between cities, one or more of your locations may be unoccupied for a short or extended period of time. If you own a condo or cottage and decide to put on the short term rental market, chances are it won’t be 100% occupied 365 days each year.
Timing is everything when you own a vacant property.
Specialized insurance coverage can provide protection if your building becomes vacant or unoccupied. It can also protect against liabilities in the event someone is injured on your property and sues for damages. Should an unfavourable incidents may occur, vacant or unoccupied property insurance coverage is specifically designed to offer necessary protection for your assets.
If you are selling the property or if it is being renovated and/or not is suitable for occupation, vacant property insurance can give you peace of mind.
To learn more about vacant or unoccupied property insurance and other ALIGNED products and services that can protect your bottom line, contact an ALIGNED Insurance Advocate today.
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Our experienced commercial insurance brokers are here to help you to determine the types of coverage you need most. Connect with one of our Canadian Business Insurance Brokers today at 1-866-287-0448 or CLICK HERE!
FAQs
1. Do you need unoccupied or vacant home insurance?
Legally you may or may not be required to have unoccupied or vacant home insurance. If you’ve taken out a mortgage on your home, the lender may include a stipulation in the mortgage contract that your home must be insured at all times. That means that if your home is unoccupied for as little as 96 hours, it may technically no longer be insured under your home insurance policy and you would need unoccupied or vacant home insurance to remain compliant with the terms of your mortgage contract.
Even if that’s not the case, you still owe a duty of care to anyone on your property. If your home is unoccupied and no longer covered under a home insurance policy, that could mean that if someone is injured on your property and they decided to sue you, you would have to pay your legal expenses out of pocket, even if you’re ultimately cleared of liability. Without unoccupied or vacant home insurance, if your vacant/unoccupied property catches fire or is burglarized, for example, you’re unprotected for the costs of the damage or theft.
2. What steps do I need to take in order to ensure that our vacant dwelling is protected?
The first thing you need to do to ensure that your vacant dwelling is protected is to contact your broker to let them know that the dwelling will be unoccupied. Your broker will then review your property insurance policy to determine whether or not your dwelling is covered under your policy. Some of the factors that may determine if your vacant dwelling is protected under your current policy or not include the type of dwelling it is (e.g. vacation home, rental property, primary residence etc.), how long it will be vacant for and the reason for the vacancy. Your broker may then advise you that you need vacant home/property insurance to ensure that your vacant dwelling is protected.
3. Once the property is vacant, what key advice can brokers offer clients?
For unoccupied or vacant properties, the number one piece of advice brokers offer their clients is to make sure that the property is fully insured. After that, a broker may advise their clients to protect their vacant property and to minimize the risks of property damage, vandalism or theft. This can include taking security measures like installing fencing and security systems, ‘winterizing’ the property, removing flammable materials from the property, having someone regularly check on the property and notifying local police and fire stations that the property is vacant.
4. Are there any other changes to the vacant property that brokers should be aware of?
Your broker should be made of any and all changes made to your vacant property such as any renovations, upgrades or landscaping being done as well as any changes to living arrangements planned for after it is occupied, i.e. if you plan on renting it out.
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Source(s): The Globe and Mail “Is your home or income property insured when it’s vacant?”
City of Vancouver: 2019 Empty Homes Tax Information
