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Topics in Homeowners Insurance
Homeowners Insurance Coverages in Plain English
Who needs insurance industry jargon? Read this to get an explanation of your homeowners insurance coverages in plain English.
What Is Replacement Cost?
Why does your agent have your policy for a different amount than your house is worth? Read this article to learn why the amount of insurance
on your homeowners policy is completely unrelated to the value of the house.
Presrving the Value in Your Valuables
Do you know if your homeowners or renters policy will cover your jewelry, electronics, or computer equipment? Do you know if they will be
replaced at the full value, or if the payment will be reduced for depreciation? Do you know if they are covered if they are stolen, lost, or broken?
How NOT To Lose Your Home-Based Business
About three out of every ten people operate some sort of home business. Their businesses vary widely, and so do their insurance needs.
But they have one thing in common: A typical homeowners policy probably does not cover their businesses the way they think it does.
Insuring a Home-Based Business: Why Most Home Businesses Could Go Up in Smoke
About three out of every ten people operate some sort of home business. Their businesses vary widely, and so do their insurance needs.
But they have one thing in common: A typical homeowners policy probably does not cover their businesses the way they think it does.
Flood and Water Damage: What Does a Homeowners Policy Cover?
Water damage is tricky on a homeowners policy, because the answer is, "It depends." It depends on where the water comes from, and what it damages.
It also depends on your company and your policy. Are you covered for storm damage? Frozen pipes? Flood? Find out here!
So Why Didn't Her Policy Pay the Cost To Satisfy the Building Codes?
Most homeowners policies reimburse you
only for the same quality of roof as the one that was damaged. What if building codes have changed since your home was built, and now you are
required to meet a higher standard? How can you make your policy pay the difference? Find out here!
Five Ways To Protect Your Home from Winter Storm Dangers
We hope you don't experience a storm-damaged roof, leaking basement, or frozen pipes this winter. Nobody wants to
go through that. Here are five very smart ways you can prepare for winter, either to avoid damage, or to be prepared
if it happens despite your preparation.
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Avoiding Insurance Nightmares with Vacant Homes
 Christy M. Perry, President
Community Insurance Center, LLC
After Jeff and Cynthia (not their real names) built a new home a few years ago, they kept their original home as a rental property.
They learned quickly that keeping good tenants in a rental home can be a challenge. Last year they had to evict their problem tenants,
and they spent several weekends cleaning the house and repairing their tenants' damage. Full of hope, they finished the work,
and set up an appointment to sign a lease with new tenants.
The house burned to the ground the night before that appointment. They watched the firefighters fight hopelessly against the blaze.
They saw their investment go up in smoke, and they felt the gut-wrenching emotions of seeing their first home destroyed.
House fires are always investigated, and the inspectors found traces of gasoline and a gas can in a closet. They interviewed Jeff and Cynthia,
although they had no evidence that they had set the fire themselves. They investigated the former tenants and the neighbors,
but were unable to determine the arsonist.
Then Jeff and Cynthia got their next shock. Their insurance company said they would not pay the claim because the house was vacant at the time.
Most companies stop coverage for vandalism and malicious mischief after the building has been vacant for 30 days.
Their rental home had been vacant for 36 days.
They came out okay in the end, however. The insurance company agreed to pay off the mortgage. Most mortgagee clauses have wording that allows
the mortgage company to be paid even if the claim is denied to the named insured because of acts of the insured or a substantial increase
in the hazard insured. Later, Jeff and Cynthia were able to sell the land for about the amount of their equity in the property. Their nightmare was over.
The High Rate of Foreclosures
The high rate of mortgage foreclosures has exacerbated the problem of insuring vacant homes. These houses have saturated the home market,
and homes placed on the market are taking much longer to sell. Many homeowners who have already moved have had to leave their old home vacant
for several months or longer while they try to sell it. At the same time, there have been an unusually high number of house fires in vacant homes
in Ohio in the last two years because of the special hazards that exist with these vacant homes.
What Coverages Are Changed When a Home Is Vacant?
There are three major changes in coverage on a vacant home. (Vacant means empty, with the furniture removed. This is different from a home that
is temporarily unoccupied, but to which you intend to return, such as a second residence.)
Most companies will not cover vandalism and malicious mischief after the home has been vacant for thirty days.
Most companies will not cover frozen pipes unless you have taken reasonable care to keep the heat turned on and otherwise prevent the pipes from freezing.
Most companies will drop the policy entirely at some point. Most often the company will refuse to renew the policy on its annual renewal date.
If you have a longstanding relationship with the company, and have your new home and your cars insured with the company,
then the insurance company might hold the policy longer as an accommodation to you. If the house is completely abandoned, however,
some companies will cancel the policy immediately because of the substantial increase in the hazard.
These policies vary from company to company, so speak to your agent for details about how your company handles vacant homes.
What Can I Do?
The goal of this article is to prevent a similar nightmare for you. It is true that vacant homes are a higher risk,
and the insurance company will probably limit the coverage when a home is vacant for an extended period. There are things that you can do,
however, to avoid those limitations and to manage the risks and keep your vacant home safer. It is very important that you understand
the coverages affected and how to manage it.
The first thing is to avoid vacating the house, if you can. Sometimes it is impossible to avoid moving out of the house before it is sold;
or to avoid having tenants move out before new tenants are ready to move in. In these cases, try to make the house look occupied,
and spend the night there occasionally. This could be expensive, but it might be worthwhile. You might be able to do it less expensively
if you have a friend or relative who is a college student or young adult who needs a free place to stay. It isn't necessarily easy;
but if you do, then the house will not be vacant, you are less likely to have a loss, and the policy will cover it if you do.
Why Are Vacant Homes Such a High Risk?
It is a combination of additional hazards, and less ability to control those hazards.
There is no one there to keep things under control. If you were home when the heat failed, you could get it repaired before the temperature
fell and the pipes burst. You might also spot faulty wiring or small plumbing leaks before they became big problems. When the home is vacant,
no one notices these things until it is too late.
A vacant home can become a target for mischief-makers, thieves, and vandals. These extra hazards include kids throwing rocks at the windows,
kids playing inside the building, or trespassers smoking and starting a fire. Even worse, it could become a hang-out for vagrants or criminals.
This is what is called an "attractive nuisance."
If the Company Drops the Coverage on a Vacant Home, Where Can I Get Coverage?
A few companies have a special policy for vacancy homes. Some people refer to this as "vacancy insurance." In some cases, you can even choose
to buy back the vandalism and malicious mischief coverage.
Most agencies do not have access to one of these policies, however, and you should be aware that it is more expensive than a regular homeowners policy.
Even the Ohio FAIR plan, which is the insurer of last resort for people who have difficulty finding coverage in the voluntary market, will not insure a vacant home.
There are a few options available, however. Talk to your local agent ... but be forewarned that it is much more expensive than standard homeowners insurance.
What Can I Do To Prevent Losses on a Vacant Home?
You can make the home look lived-in, and you can find other ways to watch the house. Try the following:
- Before anything else, notify local police and give them an emergency contact phone number.
- Adjust the thermostat. In the winter, keep the heat no lower than 55 degrees.
- If it will be empty for an extended period, have the water turned off and the pipes drained.
- Make it look occupied by keeping the grass cut, the snow cleared, the yard maintained, and curtains drawn (at least on the front).
- Ask a neighbor to park their car in your driveway.
- Put several lights on timers, along with the television or radio. Set them at different times so that someone who watches the house will see
lights go on in one room and off in another, creating the appearance that someone is home and moving around.
- Trim the shrubbery near the entrance and walkway. This makes it harder for someone to hide, and it also makes it appear you live there.
- Set up a monitored security system. Let the security company be your eyes and ears.
What Else Should I Do?
Talk to your agent! Together, you can work on ideas to minimize the risk. Understand also that he has a duty to let the insurance company know
that the house is vacant, but don't let that put off this valuable conversation. The coverage will be limited whether or not you have notified the
agent or the company that the house is vacant, so it is better to be up-front about it and discuss solutions. Hiding the truth won't change it.
That being said, everyone understands that this is a difficult situation. Even if your company cannot do what you want,
your agent should be able to help you. A good agent will help you manage the risk, and will even help you switch to another company if it becomes necessary.
If your agent cannot or will not do this, then consider switching agents. Isn't it worth it to protect your investment?
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