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August 16, 2010

Question and answer column from Insurance Commissioner John Oxendine

Q: I haven’t been able to sell my house, which I no longer live in.  Will my homeowners policy continue to cover it?

A: As the U.S. housing market struggles to rebound, many homeowners are stuck with hard-to-sell properties longer than expected.  Vacant or unoccupied homes can leave the homeowner exposed to loss and liability that may not be covered by their insurance.

Homeowners policies are meant to insure homes that are occupied, so they generally include exclusions for neglect or property abandonment on a home left vacant or unoccupied for a specified number of consecutive days.

In insurance terms, a vacant home is one the resident has moved out of and taken his/her belongings with him/her.  An unoccupied home is one where the resident is not staying at the home, but the furniture and other belongings remain.

Because vacant and unoccupied homes pose a higher risk for damage than occupied homes, insurance companies insure these properties differently and usually at a higher price.  These risks include:

• Break-ins: When a home has been unoccupied for awhile, it can show signs that nobody is around - unkempt lawn, full mailbox, no lights on - that can tip off burglars to an easy target.

• No emergency response: Without anyone home to call 911 or respond to emergencies, a manageable problem - such as a small electrical fire - can turn into a much larger, more costly disaster.

• Property liability: There is no one present to prevent others from entering the property or to supervise activity, which could increase the likeliness of an accident on the premises or property damage when the owner is not there.

Some insurers may not pay claims if a home is vacant for 60 days or more.  Some policies might automatically shift to a different amount of coverage (e.g. liability insurance only) after a specific number of days unoccupied.

Many homeowners policies have a “vacancy clause” that can be triggered if the homeowner is gone for an extended period of time.  If this happens, the homeowner could violate the terms of their contract and some or all of their coverage may not apply in the event of a loss.

Before you decide to leave a home vacant or unoccupied for a long period of time, talk to your insurance agent or company to learn how they define vacancy and unoccupancy, and whether the company will pay claims if a house is unoccupied.  Be honest about your situation, because while an extra policy might cost more, it could save you money down the road should there be an accident or damage to the home.

Many insurance companies offer an endorsement that will provide coverage for a dwelling that is unoccupied for an extended period of time.  Vacancy policies can also be purchased for different term lengths to cover a few months to a year, depending on the need.  Costs usually are higher than a typical homeowners policy due to the overall increase in risk.

Please send your insurance questions to:

Insurance Commissioner John Oxendine

716 West Tower

2 Martin Luther King Jr. Drive

Atlanta, Georgia  30334

Or call 404-656-2070 (toll free at 1-800-656-2298), from 8 a.m. to 7 p.m. weekdays, for assistance with an insurance question.

Website www.gainsurance.org

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