A lot of insurance companies don’t like to cover a vacant buildings or homes because they are more likely to suffer a range of risks including storms, floods, fires, theft and vandalism. Here’s why it’s all the more important to insure an empty property in case something goes wrong.
According to IRMI, a vacant building contains little or no furniture or other personal property. Even if it is not vacant, a building is unoccupied when people are absent. The wording in many property insurance policies limits, reduces, or entirely eliminates coverage when a building has been vacant (or, in some forms, vacant or unoccupied) for a designated period of time such as 45 or 60 days.
The carriers are placing restrictions for vacant building insurance such as not continuing coverage if the building isn’t occupied after three years. In some circumstances, for instance if a building is newer, they extend coverage to four or five years.
This has been one of the issues for vacant building writers is the length of time a building is vacant. It has more potential problems or more damage because it’s likely not being checked on or taken care of, which means higher claim because it might not be discovered for a long time. There is also more likely to be theft or vandalism on long-term vacant buildings.
Nowadays, insurers are restricting the availability of theft and vandalism coverage in the vacant building insurance market because they are getting burned by theft and vandalism claims from copper wiring theft and other criminal acts on vacant properties. However, placing business is becoming very difficult because some vacant properties are required by the lender to have this coverage.
According to Mich Brian Ruane, executive vice president and National Real Estate and Hotel Practice leader for Willis in New York, the theft is not always the most expensive aspect of these claims but the damage they do is very substantial. With that, carriers established in the market are watching their backs and are now conservatively bringing into focus at deductibles, decreasing sublimit, or in many cases excluding coverage altogether especially true of some of the newer carriers to this market because they are experiencing losses they were not prepared for.
There are written number of properties that started out on a vacant form and then the insured decided to do work so the policy was converted to a builders risk form which is a better avenue than endorsing onto vacant. But despite of the vacant property coverage issues, rates have remained stable, for now. Willis started its Distressed Assets Practice two years ago to advise clients on managing the risks that come with these financially distressed, foreclosed or abandoned properties.
If you own vacant building, a vacant building insurance that covers both property and liability/medical needs is a must have. It’s your protection from financial ruin if someone is injured on your property and sues for damages. So protect your valuable physical assets with quality insurance coverage.