There can be times, whether your North Bay property is residential or commercial, when it is vacant. As a result, the insurance coverages on the property will need to be treated differently. We’ll look at the definitions of vacancy for both commercial and residential properties, and how your insurance has to change in both circumstances.
Vacancy and Residential Properties
Vacancy refers to the circumstance where, despite the presence of furnishings, all occupants have moved out with no intention of returning and no new occupant has taken up residence. You will run up against the issue of vacancy if, for example, you move to a new home and put your home up for sale but it hasn’t yet sold or the sale hasn’t closed yet.
A home is also considered vacant in the case of a newly constructed house where no occupant has yet taken up residence. Keep in mind that this can also apply to a residential rental property that you own which is not currently occupied by tenants.
Vacancy typically doesn’t apply to a seasonal cottage since you have an intention to return. With the intention to return, the property is deemed unoccupied as opposed to vacant, and insurers already know the property may be unoccupied for a period of time.
If your North Bay property is vacant, you need to let your insurer know right away, as it affects coverage. If the property is vacant for over 30 days, and you have not advised your insurer, there will be no coverage under your policy for any loss or damage. If you let the insurer know they will usually add a vacancy permit which continues coverage with a few major exceptions:
- Vandalism, malicious acts, and glass breakage is not covered
- Water damage is not covered
To mitigate your risk, make sure water is shut off on a vacant property, install motion-sensor lights, and have someone pick up mail.
Vacancy and Commercial Properties
The concept of vacancy works a bit differently for commercial properties, but the principle is the same. The major difference is cost; vacant building insurance on a commercial property is higher than an occupied property due to the increased risk of theft, vandalism, and other damage to the property. Security systems with motion-sensor triggered lights are usually recommended by the insurance company.
Commercial property vacancy insurance typically offers Named Perils coverage, and does not include coverage for water damage. It is always recommended that if a building is vacant, the water should be turned off.
It is also generally not possible to insure a vacant commercial property for replacement cost, or what it would take to rebuild the property. Instead, settlements are based on the Actual Cash Value (ACV) of the building, which you and your broker decide on when you purchase your coverage. This can give you some flexibility in premiums, as the lower the insured cost of the building, the lower your premiums will be. This amount can range from wreckage value to the true ACV cost, which is the current depreciated value of the building.
Whether the property you own is a commercial building, your home or a residential home you rent out, as soon as the property is vacant it’s imperative that you advise your insurance provider right away. When a property becomes vacant it’s a material change in risk that the insurer must be made aware of, due to the increased risk of loss or damage. If you have a property that is vacant, and isn’t properly insured, give Kennedy a call and we can help arrange the appropriate coverage for your vacant dwelling.