Does Your Insurance Policy Cover Your Vacant House?

(June 12, 2012)

Do you know for a fact that your homeowner's insurance policy covers your Orange County house while it's vacant?

After the housing meltdown, many insurance companies stopped covering vacant houses. There was Protecting your houseno big announcement and it's certainly not common knowledge. In fact, a homeowner in Orange County sold his house to me because it had some damage that wasn't covered by insurance because it was vacant. The owner didn't have the money to fix it (and it was tens of thousands of dollars). I bought the Orange County house "AS-IS" and the homeowner was SO HAPPY!

I was in a real pickle myself when it all changed because I owned a few vacant houses.

Luckily, I was referred to an insurance broker (Debra O'Farrell of Vineyard Insurance, tell her Jennifer sent you!) who has a policy that covers vacant houses. And it ain't cheap. But it's absolutely better than nothing. And it's MUCH cheaper than other vacant house policies, if you can even find one. The good news is that if you own multiple properties that are vacant, it can be a lot cheaper.
Here's what Debra had to say about homeowner's policies on vacant houses:
1. If an insurance company does cover vacant the rates are through the roof and it's only the ACTUAL cash value of the property. The ACTUAL cash value can be much, much less than the true value of the property. Yikes!
2. An insurance agent may agree to write a rental policy on your vacant home to save you money. And let's say the agent gets the policy written and accepted. You feel comfortable that you have insurance. Right? Wrong. If there is a claim on that property, the insurance company can and may deny the claim due to misrepresentation on the part of the agent and the insured (that would be YOU).
3. What can you do to cover yourself? Make sure to read your policy for the word "VACANT", don't just take your agent's word for it.
4. If you need to switch to a true VACANT house policy, here is the info:
  • This policy is presented by American Modern and is called a "ten-plus commercial policy".
  • It covers vacant at replacement cost (most companys only cover at actual cash value, if they cover vacants at all)
  • This policy also only has one policy number and one expiration and effective date and you can add as many as you want to it.
  • On this policy your dwelling is covered automatically for 30 days, day of purchase w/o you adding to your policy.
  • Bottom line, make sure you have the right coverage on your vacant house.

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Jennifer Shenbaum

Written by Jennifer Shenbaum

Jennifer Shenbaum is a real estate investor based in Southern California. She is a veteran of the housing market crash of 2007. Best of all, she offers free remodeling ideas to all who ask.

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