Are you a homeowner? If so, you undoubtedly have purchased a homeowners insurance policy to protect your own interests, as well as your mortgage holder’s interests. It’s what we do, it is what we know we need to do. But have you ever heard of a homeowners insurance vacancy clause?
Consider three scenarios that could trigger a homeowners insurance vacancy clause
You know the familiar adage #LifeHappens. As we opined in September 2018 Life Is a Journey and we just never know what glorious adventure awaits us or what unexpected tragedy may befall us. Consider the following:
- You’ve lived your entire life in the northern United States, but with retirement you now decide you want to be a “snowbird.” Simple enough, you find a location in a state like Nevada, California, Florida, or Arizona, where you intend to live six months of the year.
- Your aging parent(s) who live independently in their own home suddenly experience a life event that requires a move to assisted living.
- The country encounters an economic downturn (think the Great Recession 2008), you experience a job loss and you need to sell your house which may now be valued below your original purchase price. So, you decide to move out facing a short sale or foreclosure.
What do these three scenarios have in common? Each home is or will be either vacant or unoccupied, and yes, there is a difference.
Vacant vs Unoccupied
According to insurance companies there is a distinct difference between a vacant home and an unoccupied home. A few years back FOXBusiness News proffered easily understood definitions:
- Unoccupied home: The property has been left as if the owners will return at any time.
- Vacant home. The property is entirely empty, without any personal property inside.
The National Association of Insurance Commissioners (NAIC) published a Consumer Alert – Moving Places, Changing Spaces which offered cautionary advice:
“Have you already moved out of your home? Don’t drop your insurance. If there is damage to the appliances or the home, you’ll be left to cover the cost. If you’ve left the property, but your furniture is still there, a vacancy clause will apply. An unoccupancy clause will apply if all items have been moved out. If you vacate the home without notifying your insurance company, they might suspend your policy or refuse to pay for damage.”
A case in point was reported on December 14, 2018, by Nashville’s WSMV News 4 NBC, “Easily overlooked detail in homeowners insurance could cost you thousands.”
Understanding your homeowners insurance vacancy clause – what you need to know
Insuring your home is part of your personal risk management. While for most people, their home is their largest personal asset, even the new homeowner needs to build a good insurance foundation to manage their personal risk. We all need to understand and be cognizant of any “vacancy clause” in a home insurance policy. Merriam-Webster defines a vacancy clause as “a special endorsement in property insurance permitting premises to be vacant or unoccupied beyond the period stipulated in the original contract and insured during the extension period either for the full or a reduced amount.” Typically, without this special endorsement, after 30 – 60 days certain types of coverages may or are no longer in effect.
An award winning website The Balance published an excellent article in March 2018 “Home Insurance Vacancy Clause.” It provides a good road map and tips to navigate the many questions about vacant homes and how to obtain a vacancy permit, an endorsement to maintain your coverage during a period of vacancy. We opened today’s post by asking “Who knew?” Well, now you know…don’t leave home without a vacancy permit!
Being prepared and informed will guide you on how to insure a great life…knowing there are solutions for insuring vacant properties which will consider the state where the home is located, the coverage amounts desired and the particular risks posed by the home being evaluated.
We recommend that you contact our John Bailey Company to review your current home insurance policy for vacant home coverage options, keeping in mind a vacancy clause can vary from company to company.