Buildings become vacant for many reasons, including ongoing repairs that make the structure uninhabitable or a tenant moving out. In this case, your standard property insurance policy will create a gap in your coverage.
Vacant building insurance provides specialty coverage for commercial properties that remain unoccupied. Protection is available before you lease out or sell the property.
In this article, we’ll highlight the importance of vacant building insurance and the coverage along with the potential costs.
Vacant building insurance protects owners of unoccupied buildings (commercial or residential) from potential hazards such as fire, theft, vandalism, and sprinkler damage. Since vacant property owners are liable for injuries to trespassers and passersby, vacant building insurance includes property owners' liability insurance.
Commercial property is vacant if it has less than 30% square footage occupancy for the intended purpose. The building can be empty for various reasons such as lack of tenants and a change in use of the building.
The property may be a newly constructed and entering the market or retail space in between leases. Vacant insurance policies have specific terms and, for instance, they may require a security monitoring system.
Most standard property insurance policies don’t cover vacant buildings. Typically, if a building remains vacant for 30 60 days, it is excluded from sprinkler damage, theft, and vandalism losses.
Building owners must embrace vacant building insurance to mitigate the financial losses resulting from these risks. A short time lapse is enough to cause significant damage.
Many commercial building insurance policies don't feature extensive coverage for vacant buildings. Therefore, an additional insurance policy is needed to protect your vacant building before you sell it or bring in a tenant.
Vacant building insurance may protect against loss by covering the following events:
Under most vacant building insurance policies, there still has to be periodic checking of the building, and an abandoned property without routine monitoring is ineligible for coverage.
The cost of the insurance coverage is negligible compared to the cost of a loss.The price of vacant building insurance fluctuates based on the following factors:
The typical policy coverage limit is $2 million. Some policies offer a $2M occurrence and $3M aggregate.
Vacant building insurance protects against unforeseen risks. For instance, the vandalism of power cables can create short circuits leading to a massive fire in the building, requiring emergency firefighters.
This insurance protects from significant losses. Vacant building insurance may compensate you for theft, vandalism, fire department charges, water damage, property damage, and debris removal.
Vacant buildings might attract vandals, squatters, and thieves. Lack of on-site monitoring exacerbates risks. Also, minor faults such as a damaged sprinkler system or leaky pipes can balloon into problems that cause substantial financial losses.
Examples of risks that can arise:
Get vacant building insurance to protect your investment. Contact your licensed insurance agent and ask them to get you a Pathpoint quote today.