This article has two purposes: First, to highlight the typically unknown risk of owning a home that lacks full-time residents. Second, to explain the difference of what it means for a home to be either unoccupied or vacant. The nuances of these two words is explained in each specific homeowner policy, so this article serves merely as a general overview. In general, unoccupied means that a home is furnished and that someone comes around periodically to observe and possibly even occupy the home. Vacant means that the house is unfurnished and abandoned, despite the occasional lawn service treatment or the like.
There are multiple scenarios of how one can end up with an unoccupied or vacant house: You inherit the home of your deceased parents, you live in Florida for 5 months of the year, you move into a new home despite being unable to sell your existing home, or you move into a retirement community while waiting for your house to sell. All of these scenarios lend to the likelihood that your homeowners insurance will not cover a future claim. The question is, why not?
Most, if not all, homeowners insurance policies view covering an unoccupied or vacant home as a greater risk when compared with covering a home that has a resident living within the house on a regular basis. Homeowner’s insurance policies include language in the policy to negate coverage after an extended period of unoccupancy or vacancy, typically between 30 and 60 days.
Say, for example, a widow passes away in February, and the house sits unoccupied for months until the estate can put the house up for sale, find a buyer, and settle in October. If the insurance company is not notified, then the house likely will become uninsured for any claims made between May and October, when settlement occurs. In this scenario, there will probably be no reason to file a claim between the months of May and October; however, the risk remains nonetheless. Say, for example, a young teenager realizes that this aforementioned house is vacant. The teenager breaks into the home, engages in harmful activities, and proceeds to injure him- or herself on the property. As unfair as it may seem, a personal lawsuit against the estate could be filed to pay for the teenager’s injuries, and given that the property was uninsured at the time, the estate’s assets could be subject to the suit.
To insure an unoccupied home, there is normally a minimum increase in premiums with a policy endorsement, but to insure a vacant home, a totally new policy is usually required, which will probably cost 2-4 times the cost of the homeowner policy. To understand these cost differences, one must appreciate the risk involved. For example, assume a pipe bursts, causing water to flow from the broken pipe. In an occupied house, the pipe damage is discovered early, and the busted pipe is quickly repaired. In an unoccupied house, such an issue may take days to discover, whereas in a vacant house, it may take months.
Another risk involves vagrancy. In an occupied house, vagrants are highly unlikely to take up residence, and in an unoccupied house, vagrants may fear the risk of being discovered; however, in a vacant house, vagrants may be bold enough to take up residence. Vagrants usually are aware of their “squatter rights,” that is, once they get inside a home, it is often difficult to remove them.
Whether you inherit a house, own a second home, or have moved, do not take a chance with your vacant or unoccupied house. Contact your homeowners insurance agent and ask for a detailed evaluation of your policy language. Ask what can be done to keep the home insured. Do not let your insurance agent treat the matter casually: I have seen agents sell policyholders down the proverbial creek when the insurance company receives a claim and the agent claims ignorance regarding the lack of coverage.
If your agent assures you that your policy covers the aforementioned risks and that an endorsement or new policy is not necessary, then make sure that you properly document such discussions with a follow-up letter or email. Unoccupancy is more common today, and an inexpensive endorsement is an easy solution to mitigate potential risk. It is best to sell a vacant property, but if you cannot, then be sure that it is insured no matter the cost.