The Specifics on Unoccupied Building Insurance

Posted by Pekin Insurance on Dec 09, 2015

If your commercial property is in danger of falling into vacancy, it's important to obtain an unoccupied building insurance extension and communicate openly with your provider

If your commercial property is in danger of falling into vacancy, it's important to obtain an unoccupied building insurance extension and communicate openly with your provider

"Vacancy" is not a term that sits well with property owners. Whether it is for a short or extended period, the risk of deterioration, vandalism, and theft rises considerably during unoccupancy. Insurance coverage for commercial properties can change when less than 30 percent of the building is occupied (a typical percentage requirement for most insurance providers).

If an owner allows his property to go unoccupied for more than 60 days, it's wise to obtain an unoccupied building insurance extension so that certain damages or losses will be covered. If your building falls into vacancy, consider the effects it will have on your renewal pricing as well. 

In this post, we're going to run through the specifics of how to obtain these insurance extensions and why it's so important to maintain proper coverage during these times.

How to obtain unoccupied building insurance coverage 

For most commercial property insurance policies, once the building has gone unoccupied (less than 30 percent occupancy) for more than 60 days, the building's coverage becomes restricted and falls under a "vacancy provision." The risk of loss and damage greatly increases with little or no occupancy, making it unwise for the insurer to protect properties from high-risk claims.

However, a property owner does have the ability to waive the vacancy provision and reestablish coverage if he can prove the building is protected and secure. If you are in a similar situation and need to obtain an unoccupied building insurance extension, here are a few ways to impress your insurance provider:

  • Install a hard-wired security and alarm system to keep out trespassers. 
  • Hire a security company to patrol to the building and surrounding property at night. 
  • Install security cameras in high-risk areas. 
  • Updates locks for windows, doors, and other entrances. 

Open communication is key to negotiating unoccupied building insurance coverage

If you own a building at risk of becoming vacant, it's best to contact your insurance agent well in advance, especially if your policy renewal date is fast approaching. If you notify your insurance company, you will be in a better position to negotiate an extension for coverage, allowing more time to fill the space with new lessees.

If a property owner can present documented proof and reassurance that the building is protected during a vacancy, most insurance underwriters will allow extensions and negotiate coverage options. The underwriter might qualify the property owner for a Vacancy Permit. This is an endorsement that protects against common hazards that vacant buildings face for a premium fee.

What to expect when not obtaining coverage extensions for vacant properties

As a property owner, you already know the risks involved for unprotected buildings. But keep in mind that your insurance coverage can drastically change if the building is vacant for longer than 60 days. If you don't notify your insurance agents ahead of time, there's more of a chance you will have to pay out of pocket for losses and damages. Here are the risks you may have to face alone:

  • Vandalism 
  • Glass breakage 
  • Water damage (sprinkler leakage, flooding, etc.)
  • Theft and attempted theft 
  • Fire or wind damage (coverage may be reduced by 15-20%) 

Things to keep in mind

When facing a possible risk of building vacancy, you have three important steps to keep in mind:

  1. Always communicate with your insurance provider.
  2. Secure the building to prove it's safe.
  3. Obtain another lessee as soon as possible.

If you follow these steps, obtaining unoccupied building insurance coverage shouldn't be difficult. Above all, make sure you get new tenants to rent out the space!

Are you a commercial property owner in need of better or extended insurance coverage? We can help you. We offer a range of competitive policies that will keep your investments amply protected. Contact us today for more information.

Do you have experiences with unoccupied building insurance or questions to share? Let us know in the comment section!


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