Sellers: Beware of Vacancy
Many sellers who move into a new home before selling their old one may also be moving into higher insurance premiums.
Most people never consider the difference between a vacant and an unoccupied home. For a homeowner like Sterling Newberry, the difference was an important one. Newberry and his wife moved into a new home in Rhode Island before they could sell their old one. That’s when their insurance premiums tripled, since their old home was now considered “vacant.”
Brian Merriam of the Merriam Insurance Agency in Schenectady, N.Y., explains that once you remove all of your possessions, your home is considered vacant, as opposed to unoccupied. “The difference between whether the house is considered vacant or not is if you leave any stuff behind,” says Merriam.
If your home is designated as vacant, you may need to purchase a temporary homeowner’s insurance policy that can be pretty pricey. "Typically", Merriam says, "the temporary policy costs three to five times more than a policy for an occupied home. Many insurance agents will ask if you plan to close on your current home before you move out; if you say no, they may suggest one of these policies."
Why do insurance companies charge such high rates for vacant homes? “Here you have homes where the lights go on at night and there is one house (in the neighborhood) that is dark,” Merriam explains, "illustrating that vacant homes are attractive to vandals. Even living next to a boarded-up house can cause your insurance rates to rise from 25 percent to 50 percent, says Merriam, but there is no set dollar figure."
Because of the huge costs of a temporary vacant home insurance policy, many homeowners take a chance of not telling anyone. “Most play the odds and get by, but some get caught,” Merriam says. Keep in mind that a few chairs and a table in an otherwise empty home will not fool your insurance company and could lead to cancellation of your insurance and potential financial liabilities if you get caught.
Bobbie Baca, a supervisor of the property and casualty unit at the Colorado Division of Insurance, advises homeowners not to bank on this strategy of avoiding higher costs. “During the course of an investigation, an insurance company may determine a home is vacant if no one has lived in or maintained the property regardless of whether there are personal items left behind,” she cautions.
"Additionally, most insurance policies won’t cover damage caused by vandals to homes that have been vacant for 30 to 60 days, depending on the policy", she says. "There are other risks of simply vacating your old property, such as broken pipes or having it illegally occupied and turned into a meth lab", says Carole Walker of the Rocky Mountain Insurance Information Association. “There are horror stories that can happen, and that’s why it affects insurance rates.”
Carolyn Gorman, vice president of the Insurance Information Institute, says that the industry handles cases of vacancy on a case-by-case basis, so you may end off better than you think. For example, many insurance companies, she says, are more likely to work with you if you have a good history of home maintenance and have not filed a series of small claims.
If you are preparing to sell your home, brace yourself for the possibility that it could remain empty for several months if you have to move quickly. Anthony Gucciardo, an associate broker with RE/MAX in Latham, N.Y., says that houses that once sold within a month or two are now staying on the market for seven months or more. As a result of this, sellers are even more willing to make concessions to buyers so they can leave their homes quicker. As a buyer, this gives a certain advantage. For sellers, this means taking a careful look at your options and possibly making the decision to bite the bullet and pay the extra money for a temporary homeowner’s insurance policy.
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