open white double door in empty house
Why Do Vacant Homes Cost More To Insure?

Insurance is a game of risk. Vacant houses carry more risk, making them less attractive for insurers. But when is a home unoccupied, and when is it vacant? Knowing the difference can save you $1,000's. Not knowing can leave you paying for damages on your own.

Vacant vs. Unoccupied

Vacant and unoccupied don't carry the same meaning for homeowners insurance companies: 

  • Vacant - no intention for anyone to stay or live there. A vacant home means that the house is without furniture and essential utilities. A vacancy is typical when homes are up for sale, going through a renovation, or an investment property not being used for living. There is also vacant land, which carries a whole new set of definitions in insurance.
  • Unoccupied - fully furnished and typically have utilities running, but no one is currently living there.

How much furniture and fixtures are necessary for a house to be considered occupied? There isn't a clear minimum other than enough belongings in the home for it to be considered habitable.

Homeowners Insurance Liability with Vacant Homes

Knowing the classification of your home is imperative to ensure you have the right coverage to remain protected. Most owners of vacant homes use a DP-1 policy to insure the dwellings of their property. Usually, this is sufficient. However, if the house goes vacant for 60 days, the house can be classified as vacant. 

Once that happens, your standard home insurance policy will no longer provide coverage. Insurance protecting against vacancies would need to be purchased. The DP-1 covers the structure against:

  • Fire, Smoke
  • Wind
  • Hail
  • Lightning
  • Explosion
  • Aircraft, Vehicles (hitting the house)
  • Volcanoes
  • Vandalism (can be added on)

And that's it! No coverage for water damage, freezing pipes, the weight of snow, theft, or anything else. 

How Common Are Vacant Homes?

There are over 1.1 million vacant homes in the US or about 1.6 percent of the 85 million homes across the nation. However, it wasn't the lingering result of the housing market's collapse in 2008. Instead, roughly 3 out of 4 vacant properties are investment properties.

Why Do Houses Become Vacant?

Outside of being an investment property, there are a few other reasons people vacate their homes. Owners can be in the middle of a move between houses. There can be a prolonged vacancy due to a lack of tenants in a rental property. And sometimes renovations or pending sales take longer than anticipated.

What Can You Do to Protect Your Vacant Home?

home alone GIF

While you don't need to go to Home Alone levels of security, there are several steps you can take to ensure that your property stays safe while it's vacant.

  1. Notify Your Insurance Agent: Before you do anything, you need to let your provider know so they can tell you the options you have available for coverage. Be as detailed as possible to make sure your policy gets adjusted for the change in living conditions.
  2. Check Alarms: Adding home security for burglary and fully charged smoke detectors will help lessen the damages should anything happen. Some insurance carriers will not cover a vacant home without a burglar alarm. 
  3. Check Up On It: Whether you enlist friends, neighbors, or stop by on your own, keeping the property maintained and looked after while vacant can help lower the chance of damages.

How Much More Expensive Is It to Insure a Vacant Property?

Because of the added risk and more significant damages of a vacant home, the cost of insuring these properties is significantly higher. On average, expect to pay >50% more than the average premium of homeowners insurance.

Why Risk Matters When It Comes to Vacant Homes

As terrifying as it is to wake up to the smell of fire, the reality is that the damage done to occupied homes is often less than unoccupied. You may stumble into the basement to discover a burst pipe on a Saturday morning, but that's much better than returning to your house after two months and finding that your basement has become a swimming pool. 

Occupied houses generally have much faster response times when facing catastrophes and, therefore, typically lower the cost of damages. Occupied homes also tend to deter both theft and vandalism. Vacant houses could potentially remain empty and unchecked for long periods making them far riskier and the potential damages far larger.

In the end, it's all about risk, and insurers are more willing to take risks on houses with people in them than empty ones. Hope that helps!

At your service,
Young Alfred