Is My Vacant Home Covered by Insurance?

Sunny empty living room with hardwood floors and fireplace
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"Our home is presently on the market as a short sale. Because my husband got transferred to another state, we moved out several months ago. The short sale is taking forever to close. We've been waiting since April, and now it is August. Last night, my agent called to say somebody had broken into our house and stolen all of the appliances. Will the bank pay for this vandalism? Is my vacant home covered by insurance?"

Don't wait for a vacant home to be vandalized before checking your insurance policy. A little-known fact is that most homeowner insurance policies do not extend coverage on a vacant home for more than 30 to 60 days.

This means that if you've moved out more than 60 days ago, your home may no longer be insured, even though you may have paid the premium for your insurance policy. The verbiage is often in the fine print.

Short Sale or Foreclosure Vacant Homes and Insurance

In short sale situations, often the bank will send out a representative from a preservation company to determine whether the home is vacant. Even if you just moved down the street, these people will change the locks and notify the bank that the home is vacant. The bank may or may not take out hard-to-find and expensive insurance to insure that vacant home. They send the bill to you.

Types of Vandalism

It's not unusual for a thug to cut off a lockbox in the middle of the night and take it home to drill out the key. Then, the thieves can return in the light of day and walk right in the front door. They back up a truck and before you can say "police," they have loaded the truck with all of the appliances.

A thief does not need to break into a home to cause damage. A thief can swipe, for example, the existing electrical panel and A/C compressor unit fairly easily because these items are generally located on the exterior of the home, in a side yard.

Sometimes kids, just for twisted fun, will throw rocks through plate glass windows to watch the glass break.

In some situations, squatters break in and set up house. These aren't the kind of people who bring in a table and chairs and use napkins. They typically sleep on the floor and throw empty beer bottles at the walls.

Tips for Obtaining Insurance

Since you're selling as a short sale, I take it you feel that a short sale is better for you than a foreclosure. Perhaps you want to protect your credit rating or make sure that no foreclosure is filed against you in the public records. You sound like a responsible person. To that extent, you may want to start with your insurance agent to find out how much a vacant home insurance policy would cost.

Those fees can vary from 2 to 5 times the amount of your regular insurance policy. Vacant home insurance can often be purchased monthly. You might wonder why a policy that covers an empty house would cost more than a policy that insures its contents but that's because vandalism is very costly to fix.

Moreover, if your home is vandalized and the bank won't pay for the repairs -- and many banks will not -- the buyer might not have enough money to buy your home -- especially with an FHA loan -- and also fix the damage.

Ways to Discourage Vandalism

People who do bad things like break into another person's home tend to choose the path of least resistance. They want to break into the home that is the easiest to break into and the home that seems to invite them to rob it. Here are some ways to discourage vandalism:

  • Put a sign rider on top of the For Sale sign that says "By Appointment Only" or "Do Not Disturb Occupant."
  • Have a friend or relative check on the home daily and pick up mail on the steps.
  • Ask a neighbor to park a car in the driveway.
  • Install security lights that are activated by motion.
  • Set up a lamp on a timer to go on and off at specified times during the day.
  • Use a security alarm.

At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.