Whether it’s delayed renovation plans or ownership transitions, your investment property may become vacant. These circumstances pose additional risks for property owners.
Unfortunately, standard commercial property insurance policies may exclude vacant properties from many important coverages. To protect your real estate investments, you can secure vacant commercial property insurance.
In this post, you’ll learn more about vacant commercial property insurance, what it covers, and why it’s important for your business.
Vacant land and vacant buildings are two types of vacant commercial properties.
Vacant land includes undeveloped property or lots. Land may stay vacant for months or even years before it is commercially developed. If you own an empty lot that you haven’t developed yet, you own vacant land.
Vacant buildings are empty buildings without occupants. Sometimes, the term “unoccupied property” is used to describe buildings that are empty of occupants but contain furniture and other personal items, while the term “vacant property” may be used to describe empty buildings that have no occupants or furnishings. Many insurance companies have different methods of determining whether a property is 'occupied' vs. 'vacant'.
Some insurance companies may be comfortable insuring light renovations, but underwriting guidelines will vary between markets, and some insurance carriers may view a building undergoing renovation as a 'builder's risk' which is a separate type of insurance coverage.
Standard commercial property insurance policies often have a vacancy clause that excludes coverage if a property is vacant for a certain period of time. For example, if a property is vacant for 60 consecutive days, the insurance company may not cover various losses associated with vacant properties.
Vacant properties are especially vulnerable to criminal activity, including vandalism and theft. Arson is another major threat. A National Fire Protection Association report found that an average of 30,200 structure fires occurred each year, resulting in $710 million in direct property damage per year. Many of these fires were the result of arson: half of the vacant building fires were set intentionally, while only 10% of all structure fires were set intentionally.
Vacant commercial property insurance can provide general liability and commercial property coverage.
General liability insurance provides coverage for certain claims from third parties. For example, if someone is injured on the property, general liability insurance can cover the resulting medical costs and litigation.
Commercial property insurance for vacant properties provides coverage for an array of loss events that result in damage to the property. These losses can include acts of vandalism, fires, and storms.
It’s possible to secure general liability or commercial property coverage, but in many cases, you’ll want both coverages to protect your business. As with any insurance policy, read the terms carefully to understand the limits, exclusions, and requirements.
Many common scenarios exist to file a claim under a commercial property or general liability insurance policy for vacant properties. Consider the following examples:
How much you pay to insure your commercial vacant property will depend on several factors. Circumstances that impact your level of risk, such as your location and proximity to the coast, can affect your rates.
You can help keep your rates down. Consider implementing strong risk management policies. For instance, you can add security measures, like fences and locks, to prevent or detect unauthorized or unforeseen activity at the vacant property.
Your coverage limits and terms will also impact your rates. When deciding how much coverage is necessary, consider the current value of your property. A replacement cost policy will provide coverage for the cost to rebuild using comparable building materials, while a policy that offers actual cash value may provide a smaller payout due to the impact of depreciation.
For general liability coverage, keep in mind that lawsuits against businesses can reach substantial sums. Securing higher limits will result in higher premium costs, but it will also provide more coverage.
In addition to the premium required to purchase coverage, you should consider the deductible. The deductible is the portion of the claim that you will be required to cover out of pocket. You can generally secure a lower premium rate by agreeing to a higher deductible, but you will need to pay more if there is a claim.
Vacant properties expose your business to various risks. Commercial property insurance helps protect your investments. Pathpoint offers vacant commercial property insurance policies for terms of three, six, nine, or 12 months. Contact your insurance agent and ask them to get you a Pathpoint quote today.