The Who, What, When, and Why of Residential Vacancy Insurance

Our Stories:

We have now had TWO instances where we have needed and had to file claims for vacancy insurance!

First, let me tell you a quick story about how we came to know the who, what, when, and why of residential vacancy/unoccupied home insurance.    In late 2020, sadly, my brother passed away suddenly.  I advised our family’s insurance broker of the news and he asked if the home was going to be unused for 30 days or more.   Because we needed time to grieve before removing his many personal belongings, I responded “yes”.  He recommended that we add a vacancy endorsement on the policy and boy, am I glad he did!  Here is why:

Residential property that remains vacant or unoccupied for longer than 30 days, may not be covered by liability insurance.  Why?  There is a higher risk of catastrophic damage occurring from fire, vandalism, or injury when there is no one around to call 911 to report a fire, get rid of squatters, or control who steps on your property.

What happened next

Since my brother’s passing had been discovered, the property has experienced several crimes.  It has been broken into multiple times, with one occurrence resulting in severe smoke damage.  We have had a vehicle and several personal items stolen, as well as vandalization and damage to many parts of the home.  Unfortunately, where the vehicle had insurance, the contents of the home were not covered.  You see, my brother lived in a rental home of my parents.  He did not carry renter’s insurance, therefore, his contents were not insured.  This is exactly why we now require our tenants to carry renter’s insurance.  Read more about that in our blog Why Landlords Should Require Renter’s Insurance.

Because we added a vacancy endorsement on our policy, we are covered for the broken doors, windows, smoke damage, and vandalism.  We would not have been covered without that endorsement.  Clearly you can see why we needed residential vacancy insurance!  Continue reading to learn about the second time in two years that we needed this policy!

What happened to our sweet 100 year single family rental property

In October of 2021 we had just completed some updating and remodeling to our small single family rental property in Chico, California.

We had installed all new windows, flooring, repaired a dry rotted deck, and had painted the entire inside of the property to get it ready to rent after we had college kids move out.

As the home was vacant, our son decided to take a vacation to go up to the area and stay while he hiked the local trails.  When he walked in, he said it sounded like someone was in the shower!  As he walked to the bedroom he noticed the floors were wet. When he got to the bathroom found that the water supply line to the toilet had broken and flooded 1/3 of the home!

The floors, baseboards, and several feet up the walls were wet and had to be removed.  Thankfully the water penetration was caught within a day or two so mold had not set in…yet.

He shut off the water, removed all the carpets, opened all the windows and began to dry the home out.  Meanwhile, we contacted our insurance agent who assured us all was well because we had added the vacancy endorsement to our policy.

Unfortunate Circumstance

The damage from this water intrusion ran us nearly $30,000 in repairs.  We had to gut the main bathroom and replace all flooring, baseboards, and sheetrock in several rooms.  The tough part of this was because this home is located in an area that experienced the worst wild fire in the country just two years prior. We were unable to find a reliable contractor or subs to start any of the work for nearly 6 months!

Read below for information on who and when a property owner would need to add vacancy insurance on to their policy.

Who, What, When You Need Vacancy Insurance

First, who needs this? Anyone who’s home (rental or personal residences) will be unoccupied or vacant for 30 days or more for any reason.  It is a special endorsement for full time inhabited homes.  Most second homes or recreational homes have this coverage within the policy already.

Second, what is this coverage? It is an additional insurance rider to cover the increased liability of an unoccupied home.  Most home liability coverage has it specified that the policy does not apply if the home is vacant for 30 days or more. Read the fine print of your policy.

Lastly, when should someone should consider getting vacancy coverage?

• A rental or primary home will be unoccupied for 30 days or longer due to prolonged vacancy after a tenant exits.
• A remodel is being done to a property and occupants have moved out.
• A rental vacation property is managed that has long gaps in use.  For example, you own a summer rental that is closed up for winter months.
• Someone who goes on an extended vacation for longer than 30 days. Congrats if this is you!
• A new property has been purchased but there will be a delayed move in. For example, you need to place new tenants.
• Someone who lives alone and falls ill or has surgery which requires a stay in a medical or rehab facility for a prolonged period of time (this is for those with elderly parents).

Additional Items To Note

There is a significant increase in cost, up to 50% more, for this coverage.  Some companies have an entirely separate policy to take out, others add an endorsement on to the existing policy.  They may accept having a caretaker check on the property every few days to avoid needing the vacancy policy.  In any event, we hope this has showed you why it is recommended to speak with an insurance broker to see what your current policy covers and if you are someone who should consider a residential vacancy endorsement when your properties are unoccupied.

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Here are some other articles we have written for landlords that you may find helpful as well:

Cash Reserves For Rental Properties, How Much Is Enough?

Marketing Your Rental Property: Get to Know the Neighborhood

Tips For Taking Great Rental Property Photos

Security Deposits: Top 5 Tips Landlords Should Know

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