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After Jeff and Cynthia (not their real names) built a new home a few years ago, they kept their original home as a rental property. They learned quickly that keeping good tenants in a rental home can be a challenge. Last year they had to evict their problem tenants, and they spent several weekends cleaning the house and repairing their tenants' damage. Full of hope, they finished the work, and set up an appointment to sign a lease with new tenants.

The house burned to the ground the night before that appointment. They watched the firefighters fight hopelessly against the blaze. They saw their investment go up in smoke, and they felt the gut-wrenching emotions of seeing their first home destroyed.

House fires are always investigated, and the inspectors found traces of gasoline and a gas can in a closet. They interviewed Jeff and Cynthia, although they had no evidence that they had set the fire themselves. They investigated the former tenants and the neighbors, but were unable to determine the arsonist.

Then Jeff and Cynthia got their next shock. Their insurance company said they would not pay the claim because the house was vacant at the time. Most companies stop coverage for vandalism and malicious mischief after the building has been vacant for 30 days. Their rental home had been vacant for 36 days.

They came out okay in the end, however. The insurance company agreed to pay off the mortgage. Most mortgagee clauses have wording that allows the mortgage company to be paid even if the claim is denied to the named insured because of acts of the insured or a substantial increase in the hazard insured. Later, Jeff and Cynthia were able to sell the land for about the amount of their equity in the property. Their nightmare was over.

The High Rate of Foreclosures

The high rate of mortgage foreclosures has exacerbated the problem of insuring vacant homes. These houses have saturated the home market, and homes placed on the market are taking much longer to sell. Many homeowners who have already moved have had to leave their old home vacant for several months or longer while they try to sell it. At the same time, there have been an unusually high number of house fires in vacant homes in Ohio in the last two years because of the special hazards that exist with these vacant homes.

What Coverages Are Changed When a Home Is vacant?

There are three major changes in coverage on a vacant home. (Vacant means empty, with the furniture removed. This is different from a home that is temporarily unoccupied, but to which you intend to return, such as a second residence.)

• Most companies will not cover vandalism and malicious mischief after the home has been vacant for thirty days.
• Most companies will not cover frozen pipes unless the you have taken reasonable care to keep the heat turned on and otherwise prevent the pipes from freezing.
• Most companies will drop the policy entirely at some point. Most often the company will refuse to renew the policy on its annual renewal date. If you have a longstanding relationship with the company, and have your new home and your cars insured with the company, then the insurance company might hold the policy longer as an accommodation to you. If the house is completely abandoned, however, some companies will cancel the policy immediately because of the substantial increase in the hazard.

These policies vary from company to company, so speak to your agent for details about how your company handles vacant homes.

What Can I Do?

The goal of this article is to prevent a similar nightmare for you. It is true that vacant homes are a higher risk, and the insurance company will probably limit the coverage when a home is vacant for an extended period. There are things that you can do, however, to avoid those limitations and to manage the risks and keep your vacant home safer. It is very important that you understand the coverages affected and how to manage it.

The first thing is to avoid vacating the house, if you can. Sometimes it is impossible to avoid moving out of the house before it is sold; or to avoid having tenants move out before new tenants are ready to move in. In these cases, try to make the house look occupied, and spend the night there occasionally. This could be expensive, but it might be worthwhile. You might be able to do it less expensively if you have a friend or relative who is a college student or young adult who needs a free place to stay. It isn't necessarily easy; but if you do, then the house will not be vacant, you are less likely to have a loss, and the policy will cover it if you do.

Why Are Vacant Homes Such a High Risk?

It is a combination of additional hazards, and less ability to control those hazards.

• There is no one there to keep things under control. If you were home when the heat failed, you could get it repaired before the temperature fell and the pipes burst. You might also spot faulty wiring or small plumbing leaks before they became big problems. When the home is vacant, no one notices these things until it is too late.
• A vacant home can become a target for mischief-makers, thieves, and vandals. These extra hazards include kids throwing rocks at the windows, kids playing inside the building, or trespassers smoking and starting a fire. Even worse, it could become a hang-out for vagrants or criminals. This is what is called an "attractive nuisance."

If the Company Drops the Coverage on a Vacant Home, Where Can I Get Coverage?

It is very difficult and very expensive to obtain insurance coverage on a vacant home. You will have to go to a high-risk insurance company that specializes in cases like these. Even the Ohio FAIR plan, which is the insurer of last resort for people who have difficulty finding coverage in the voluntary market, will not insure a vacant home.

There are a few options available, however. Talk to your local agent ... but be forewarned that it is much more expensive than standard homeowners insurance.

What Can I Do To Prevent Losses on a Vacant Home?

You can make the home look lived-in, and you can find other ways to watch the house. Try the following:

• Before anything else, notify local police and give them an emergency contact phone number.
• Adjust the thermostat. In the winter, keep the heat no lower than 55 degrees.
• If it will be empty for an extended period, have the water turned off and the pipes drained.
• Make it look occupied by keeping the grass cut, the snow cleared, the yard maintained, and curtains drawn (at least on the front).
• Ask a neighbor to park their car in your driveway.
• Put several lights on timers, along with the television or radio. Set them at different times so that someone who watches the house will see lights go on in one room and off in another, creating the appearance that someone is home and moving around.
• Trim the shrubbery near the entrance and walkway. This makes it harder for someone to hide, and it also makes it appear you live there.
• Set up a monitored security system. Let the security company be your eyes and ears.

What Else Should I Do?

Talk to your agent! Together, you can work on ideas to minimize the risk. Understand also that he has a duty to let the insurance company know that the house is vacant, but don't let that put off this valuable conversation. The coverage will be limited whether or not you have notified the agent or the company that the house is vacant, so it is better to be up-front about it and discuss solutions. Hiding the truth won't change it.

That being said, everyone understands that this is a difficult situation. Even if your company can't do what you want, your agent should be able to help you. A good agent will help you manage the risk, and will even help you switch to another company if it becomes necessary. If your agent can't or won't do this, then consider switching agents. Isn't it worth it to protect your investment?

Ms. Perry had about 15 years of product management experience before she opened her agency just outside Columbus, Ohio. Because of her background, she focuses on annual protection reviews with her customers, helping them to find what their policies cover and what is excluded. For more information about the types of things you should discuss with your agent in your next annual protection review, please visit her web site at http://www.community-ins.com or her blog at http://www.greatinsuranceeasy.blogspot.com

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