About Insurance for Vacant Property
A real estate insurance policy may include a vacant property clause. Both homeowner's policies and commercial policies may cover vacant real estate in certain circumstances. A standard property insurance policy usually does not cover vacant real estate, although the insurance company usually grants the real estate owner a grace period of 60 days.
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Property Damage
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An insurance company expects the property owner to perform regular maintenance and repairs, because the insurance policy is meant to cover only unlikely catastrophes. The insurance company may assume that the owner is not maintaining the property. Neglect can cause additional damage. For example, a crack in a window which would be easy to fix or replace if the owner was present may let rain or snow in, which causes additional water damage.
Third-Party Coverage
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A property insurance policy also covers injuries to other people who are present on the property, even if they are present without the property owner's permission. If the homeowner abandons his property, the lack of maintenance may lead to new hazards that weren't present when the insurance company wrote the policy, such as broken glass from a window or exposed electrical wire.
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Time Frame
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The length of the grace period may vary, depending on the terms of the property insurance contract. The grace period may start at the time that the policy becomes effective, so the real estate owner receives the full grace period. An insurance company may start the grace period at the time the owner abandons the property, so the grace period is shorter than the time period that the property is covered by insurance.
Reduced Payout
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Vacant property insurance may pay out a claim at a reduced rate. According to Purdue University, a property insurance policy that provides $500,000 in coverage may only pay out $500,000 during the grace period. The property owner may be eligible for a smaller payout, such as $250,000, after the grace period ends.
Group Coverage
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An abandoned building may receive coverage under a group policy. A company may purchase a single property insurance policy for all 400 properties that it owns. The insurance company may renew the policy before individually inspecting each of the properties to see if the company is still using it. A company may also purchase a policy that covers every building on a single property, and renew this policy even if it is no longer using one of the buildings.
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