Key Differences Between Unoccupied and Vacant Commercial Property Insurance Coverage

As a landlord, you know you need to insure your commercial property. But getting commercial property insurance can be confusing. One of the key factors in getting the right policy is defining whether or not your property is unoccupied or vacant. This article dives into what those terms mean and what that means for your commercial property insurance needs.

Introduction to Commercial Property Insurance

Getting the right insurance coverage for your property is important. Without it, you could be denied claims and be held liable for losses. Insurance companies are concerned when it comes to commercial properties as to whether or not a property is vacant or unoccupied. A vacant property is void of any occupants or belongings. It’s an empty space. This is different than an unoccupied property, which has belongings in it but doesn’t have people regularly visiting the site. This should be defined before you get commercial insurance. 

Defining Unoccupied and Vacant Properties

Let’s take a closer look at what an unoccupied versus a vacant property is. 

What Constitutes an Unoccupied Property

Unoccupied is a property that has things in it but is not regularly used. Think of an unoccupied property as a seasonal home in Florida where there is furniture, clothing, and appliances, but the place is unoccupied for one or more seasons. When it comes to commercial property, the location may be leased, but the tenants are not ready to start operations. 

Characteristics of a Vacant Property

A vacant property has no one in it, with no belongings either. It is completely empty. A vacant property doesn’t need personal belongings coverage when insuring it because there isn’t anything at the location. 

Insurance Coverage for Unoccupied Commercial Properties

You’ll need to speak with your insurance agent about getting the right policy for an unoccupied commercial property. The agent will likely need to know how long the property is unoccupied and whether or not there are maintenance or managers who visit the property regularly to ensure it is intact without any problems. The policy you get will need to include personal belongings to ensure the proper coverage of assets located at the property. 

Situational Coverage Scenarios

For the commercial property owner, you may have a seasonal rental that is furnished. This could be a cabin at a ski resort. You’d want to have the personal property inside insured along with the structure of the cabin. This is where unoccupied commercial property insurance comes in. 

Common Exclusions for Unoccupied Policies

Unoccupied commercial property insurance won’t cover most natural disasters, such as earthquakes and floods. You will need to get separate insurance to cover these types of losses. 

Insurance Coverage for Vacant Commercial Properties

A vacant property is usually defined as one without tenants for anywhere from 30 to 60 days. This number is dependent on the insurance company’s underwriting conditions. The longer a property is vacant, the more likely it is to experience a loss such as vandalism. 

Specific Risks Addressed

Insurance companies want to know that commercial property owners have a plan in place to reduce the chances of a claim for vacant properties. This means you may be asked to set up security cameras or have a property manager regularly visit the property to check on it. Vacant property insurance will insure for vandalism, fire, and water damage. 

Common Exclusions for Vacant Policies

Similar to unoccupied property insurance, vacant property insurance won’t cover natural disasters such as floods or earthquakes. While it does cover water damage, this is limited to internal pipes. 

Key Differences Between Unoccupied and Vacant Property Coverage

Both an unoccupied and vacant property are at risk of loss because there isn’t a daily person there to prevent or mitigate losses. A vacant property is considered more risky because it doesn’t have any signs of tenancy, whereas an unoccupied property does. Insurance companies typically consider a property vacant if it is void of tenants for anywhere from 30 to 60 days. Insurance companies will set timelines for unoccupied properties. 

Implications of Vacant and Unoccupied Status on Claims

Having a loss at an unoccupied or vacant property can be a scary thing because the insurance company is leery about insuring it in the first place, knowing it is at higher risk. This is why it is essential to be completely honest with insurance companies about vacancy and document losses, providing extensive documentation with pictures and statements from restoration experts. 

Tips for Property Owners

Here are some tips for property owners when it comes to vacant and unoccupied properties. 

How to Manage Unoccupied and Vacant Properties

Have a plan in place to manage these properties. It is good to have regular maintenance done on the property and have a property manager visit the site regularly to see if any problems exist. For example, a property manager could detect a leak before it becomes a full on flood in the house, mitigating the damage. 

Steps to Ensure Adequate Coverage

Talk to your insurance agent honestly about the occupancy of the place. You want to get the right policy to ensure you have coverage for the building structures and the personal belongings in the building if there are any. The key is getting the right policy from the onset. 

Common Pitfalls and How to Avoid Them

The biggest mistake property owners make is trying to get a cheaper policy that has tenants. Though cheaper, it will not have coverage in a loss if the claims adjuster sees the property is vacant or unoccupied. Get the right policy from the start.