When insurance is purchased for the purpose of protecting the home and its contents, and it is intended to be lived in (occupied), insurance companies are generally able to determine the rate to charge for a homeowner’s policy with a high degree of certainty that they will not get stung. Consequently, because the expected variables, or perils, remain relatively constant, they really don’t lend themselves to any surprises when accepting the risk. After all, they have decades of experience accurately assessing the risk of insuring occupied properties. Therefore, insurance companies are able to determine, within a reasonable level of expectation, that they will make a profit. Let’s face it, insurance companies, as with any business in our great free market, strive for a large, positive, bottom line.
However, when the property is vacant (no contents) or unoccupied(contents, but nobody home) for an extended period of time (usually 60-90 days), the game changes and “all bets are off.” When word gets around that a property is in abandonment or disuse, thieves and vandals show up out of nowhere. Glass is broken, walls are smashed, and those with no place else to go (squatters) take up illegal residency, building fires on frigid nights in the middle of what was once a formal dining room. One might assume that if the personal belongings and the furnishings and appliances are all gone there would be nothing left to steal, but it’s amazing how industrious thieves really are; they will take anything of value – building materials, carpets, countertops, bathroom fixtures, and best of all; copper pipes and wiring to be either sold or used somewhere else. Another example is what if a minor leak breaks out – a very common problem that is usually fixed in a very short period of time by the occupier to prevent further damage. But, if there is nobody there, the problem can exist for weeks or even months, with disastrous results to ceilings, carpeting, or worse – the dreaded “M” word that results from mixing a little moisture to a little organic material (wood) and with the proper temperatures – Voila!.
There are many reasons properties become vacant, but some of the most common are: the previous owner has died and the property has gone to estate; it was a rental that has lost its useful value and the owner is waiting to sell it; it just is not going to be used for an extended period of time; or (most commonly now), the lender has foreclosed on it. In any case, the insurer will either cancel the policy outright, or they will offer an alternative – a vacant dwelling policy, which is a watered-down version, or short list of the coverage that was in place when the property was occupied. Over 90% of homeowners are unaware of this and are in danger of risking everything as it concerns the property because they have simply never read the provisions in there insurance policy. In fact, right now, there are thousands of homes out there sitting uninsured without the owners’ knowledge.