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A scary issue was just brought to my attention. It’s something everyone needs to be aware of if they are selling or buying a home. This is yet another aspect to the fallout from the housing crisis…
Vacant Property, courtesy of Matt McGee
Vacant Properties Are an Exclusion to Standard Policy
First, I heard a rumor that the typical insurance policy carried by roughly 85% of homeowners on their home, referred to as the HO-3 policy, has a number of exclusions, including “Vandalism and malicious mischief if the building has been vacant for more than 30 days”. I checked this out on several websites and confirmed its validity.
Insurance Companies Will Cancel the Policy on a Vacant Home
To get more information and verify specifics with someone I trust, I called one of my favorite sources for homeowners insurance in the coastal North San Diego area, Rancho Santa Fe Insurance. Despite being located in and named after one of the wealthiest communities in the nation, RSF Insurance provides policies for all kinds of properties at very competitive rates. I spoke with Laura who explained to me that if an insurer finds out a property is vacant, they will immediately cancel the policy. It goes far beyond simple exclusion! Apparently and understandably, it is considered too risky. So many things can go wrong, from an unnoticed broken pipe, to the vandalism I spoke of above.
Between a Rock and a Hard Place, and up S___’s Creek without a Paddle!
As if the situation isn’t dire enough when a property is in foreclosure or being sold in a short sale, it may lose its insurance and end up completely worthless!
Eva – Excellent post! In addition to this alarming fact, I recommend home sellers request a C.L.U.E. report on their Del Mar home. Think of a C.L.U.E. report as a “Carfax report” for your home. The report details any claims made by the current homeowner. Often insurance companies will not offer coverage for homes that have made repeated claims. Frivolous claims by a previous homeowner could be a “death nail” for would-be Del Mar home buyers who are seeking a policy on their new home. Better to be armed with a C.L.U.E. report before the sell then make a terrible mistake buying an un-insurable home.
nice share