Vacancy terms are an often overlooked part of property insurance agreements, yet are crucial for property insurance owners to understand when purchasing insurance. Aside from understanding the specific vacancy terms and how they pertain to each individual insurance policy, it’s important to understand what qualifies a property to be considered unoccupied as opposed to vacant.
Unoccupied Property versus Vacant Property
Unoccupied property is largely defined as a house that contains furnishings but no occupants. In this respect, the vacancy terms do not come into effect, as the house is still considered to be “lived in”.
Property is also void from being considered vacant if a certain amount of space is occupied or rented by a legal tenant, or if the property is being used by a lessee or sub-lessee for customary business operations. Most policies also exclude properties from being considered vacant if they are under construction or are undergoing renovations.
Vacant means that the property is devoid of any occupants or furnishings. Under many vacancy terms in insurance policies, this is when the effects of vacancy terms go into effect.
A vacant property means that the property is devoid of furnishings to the point that it is no longer able to be considered a dwelling, or fit for whatever purpose(s) it was originally insured for, such as commercial, residential and so forth. How this is determined is largely contextual; there is no clear cut definition as to what constitutes what type of furnishings are necessary to deem a property fit for occupation.
It’s important for policy holders to understand what their policy issuer considers guidelines for differentiation between unoccupied and vacant, or they may risk being uninsured if damage is to occur to the property.
Why Does It Matter?
Understanding the vacancy terms in your insurance policies is essential because policy issuers won’t cover certain types of damage caused to a property if the property is considered vacant. For a majority of vacancy terms, a property must be vacant for at least 60 days before coverage will be limited or totally excluded, including damage or loss from:
- Sprinkler leakage, unless you have protected the system against freezing
- Building glass breakage
- Water damage
- Theft or attempted theft
It’s imperative that policy holders take care to keep their property cared for and protected from outside influences like vandalism or theft, even if they think that their building isn’t vacant. As stated, the lines are blurred when it comes to classifying the property in a claim as unoccupied or vacant, so regular building maintenance and weatherproofing is still required if policy holders want the property to be protected against certain types of damage that naturally occurs over time.
It’s the same with vandalism and theft; while not always preventable, keeping a secure property with locked doors and windows if possible is always a good start. Larger properties should also have protective fences or barriers around them, in order to deter vandalism and theft. While this doesn’t guarantee that a property won’t be vandalized or broken into, it can reduce the amount of damage or loss caused by them. With vandalism costing schools, homeowners and businesses more than $15 billion a year1, it’s more important than ever for policy holders to understand their coverage when it comes to vacancy.
Discuss These Items with Your Insurance Agent
The first step to protecting your unoccupied or vacant property is to have a candid conversation with your insurance agent about your terms and the status of your property. You’ll want to discuss items like: how long your property is expected to be vacant or unoccupied; how often you plan to check on the property; if the heating or air conditioning will be maintained; and, if there are any other parties involved, such as a property manager. With items like these solidified, your insurance agent will be able to customize an insurance policy and its terms to suite the specific needs of your property and budget.
If you’re in the beginning stages of considering property insurance for a new property, talk to one of our knowledgeable team members. We’ll walk you through the components of a property insurance agreement and help you identify a policy that meets your specific needs—nothing more, nothing less.
- Wipe Out Vandalism And Graffiti, U.S. Department Of Justice