| NYC Business Group
Vacant Building Insurance: Who Needs It and What It Covers
Just because your commercial building is vacant doesn’t mean it does not face potential risks. Risks can vary from water damage to fire or theft. That’s why you need vacant building insurance coverage. Therefore, vacant property insurance is a must-have, whether it is an ownership transition or a delayed renovation plan.
Did you know that standard commercial property insurance may exclude vacant properties from crucial coverages? Yes! That’s true, and the only way to protect your real estate investment is by purchasing vacant commercial property insurance. This article will discuss what vacant building insurance is, what it covers and why you need it.
What is Vacant Building Insurance?
Also known as a vacant home, unoccupied home or vacant property insurance, vacant building insurance provides coverage to a vacant residential or commercial building that’s not under construction or renovation. Usually, vacant building insurance is bought for a short period, for example, three months to a year, depending on the circumstances. When purchased, the policy offers coverage until the building gets back into use through occupancy, renovation, or construction.
Who Needs to Purchase Vacant Building Insurance?
The policy is necessary for any property owner with a vacant building, even temporarily. There is a misconception that Builder’s Risk policy is a good option if you are planning construction or renovation soon. However, that’s not the case because Builder’s Risk policies only cover vacant buildings for a very short period. Therefore, your building will be uninsured if the policy runs out of time. Builder’s Risk insurance typically offers coverage to vacant buildings up to 45 days at the beginning of a project, i.e., if construction is delayed. After 45 days, if the building is still vacant and there is a claim, it could result in a denial.
Why is Vacant Building Insurance Needed?
The policy is designed to cover basic general liability and property exposures. General liability kicks in if a property manager or security guard is hurt while on the property. On the other hand, property exposures cover damages that occur to the vacant building, like water damage resulting from burst pipes. Basically, the policy can cover losses resulting from the following events:
- Vandalism & theft – if the ceiling, walls or fixtures are damaged, the policy will cover the loss. It also covers other deliberate forms of vandalism or theft, including glass breakage and fire.
- Debris removal – if there is vandalism, there is a high possibility of broken glass and other items in the building. Debris removal could prove costly depending on the extent of vandalism or damage. With vacant building insurance, the insurance company will incur debris removal costs.
- Water damage – burst pipes or leaky sprinklers could cause immense damage in a vacant building. Flooding, mold growth and damaged walls or floor are some of the effects of water damage. Vacant building insurance can cover all water damage repair costs.
- Injury to the third party – although a building is vacant, the owner is liable to lawsuits if third parties are injured within the premises. For example, if someone is hit by a falling object from a vacant building, the vacant building policy will cover the medical, legal, settlement and lost wages.
- Fire department costs – the policy covers fire department costs in case of a fire
How Much Does Vacant Building Insurance Cost?
Ideally, vacant building insurance varies depending on the following factors:
- Length of vacancy - refers to the period the building will remain vacant. It can range from a few months to a year or more. If the building remains vacant for a long time, it will cost more to insure.
- Term – this refers to the duration of the vacancy period. The greater the term or length, the higher the insurance cost.
- Location – Just like in real estate, the location of the vacant building determines the insurance cost. The insurance cost will be higher if the building is in a high-crime area prone to theft and vandalism.
- Security systems – some insurers require property owners to install security monitoring systems. If you have installed fire alarms and security systems, you will get an offer and lower insurance premiums.
- Building size – the square footage and number of floors determine the insurance cost.
Final words
An uninsured vacant building is a risk to the property owner. Instead of taking corners and trying to save money only to spend more, follow the right path. Consider purchasing vacant building insurance and rest assured, knowing you are covered. Depending on the insurer and your budget, you can get vacant building insurance terms of three, six, nine or 12 months. Consult your insurance agent to learn more about vacant building insurance. Give us a Call Today, to get a Free Quote on Vacant Property Coverage!