Unsold, vacant homes may be hard to insure

By DAVID P. WILLIS, Asbury Park (N.J.) Press
Posted Monday, October 15, 2007Read Comments-->10/15/2007 -->
At a time when houses are taking longer to sell, some people must move into a new house before their old one is sold, leaving it to sit vacant.
That can create an insurance dilemma, because homeowners' insurance policies typically require that the owner live in the house.
Solutions are limited. Some insurance companies will extend coverage for a while. Also, some insurance companies do offer coverage for vacant houses, but for a higher price.
First, homeowners must realize there's a problem.
"They don't think about it," said Chris Oehrle, senior vice president of Weichert Insurance Agency in Morris Plains, N.J. "They have a lot of other things going on in their lives, and calling their insurance agent isn't the first thing on their mind."
An insurance company might find out about a vacant house if it is inspected as part of the sale process, or if the owner files a claim, which could be rejected, said Keith Taege, account representative at Turton Signature Insurance in Point Pleasant Beach, N.J.
Homeowners and insurers often find out as part of the process of signing up for homeowners' insurance for a new house, said Sharon Cooper, a spokeswoman for Selective Insurance Group Inc.
Homeowners' policies generally don't cover vacant houses because vacancy increases the possibility of damage, including vandalism or frozen pipes.
"They become neighborhood clubhouses sometimes," Oehrle said.
Insurers have different ways of handling the situation.
Selective tries to work with policyholders by continuing coverage with a dwelling policy for a "reasonable amount of time for the sale to occur," said Michele Aromando, vice president of personal lines.
How long a policy is continued would be determined by factors including whether a contract is pending, whether the house is checked regularly and whether the utilities are on, Aromando said.
State Farm Insurance Co. generally gives a policyholder six to nine months to sell a vacant house or may extend it to the policy's expiration, said spokesman John Baldino.
"The company does understand that the real-estate market is cooling down," Baldino said. "We will evaluate each unique case."
If a house is vacant for more than 30 days, the policy may only cover major losses, such as from fire, and not smaller problems such as vandalism or broken windows, Baldino said. That's because damage to a vacant house can go unnoticed for an extended period of time, which makes the damage more severe. But people can buy add-on coverage for vandalism and malicious mischief.
State Farm won't renew a homeowner's policy if a house is vacant and the company does not insure vacant homes, Baldino said.
Other insurers do. Some companies offer policies that cover vacant properties for fire, vandalism, storm damage and even frozen pipes, Taege said. But the policies can be more expensive than a traditional homeowners' policy.
Oehrle said Weichert has written 20 percent to 25 percent more of this type of policy this year compared with last year.
"People still need to move," Oehrle said. "You get a new job. You are transferred to another city. Since houses sit on the market a lot longer, the need for a vacant-home policy is greater."