If you’re selling a home, do you need more insurance? The question never crossed my mind as I prepared to sell my single-family home near Orlando, Florida.
It should have.
It was a buyer’s market, and my real estate agent had only had a few nibbles. I needed to leave for the West Coast soon, which meant the home would be vacant. Then my insurance agent gave me more bad news: My homeowner’s policy wouldn’t cover the home if I wasn’t living in it.
“If your house is unoccupied, your homeowners insurance will likely cancel your policy or deny any claims you make,” explains Josh Stech, CEO of Sundae, a real estate site. “You’ll need to read the fine print in your individual insurance policy as this can vary from insurer to insurer.”
Solution: A vacant and general liability insurance policy. Six months of coverage set me back $1,744.
But my experience raises several questions. What does home insurance cover when you’re selling a home? What kind of insurance do you need? Does it make a difference to your insurance company if your home is occupied or vacant?
A vacant home policy costs about 120% more than regular insurance, says Bill Samuel, owner of Blue Ladder Development, a home-buying company in Chicago. That’s because, statistically, it’s more likely to have an insurance claim on a vacant property.
“We use a vacant [house] policy after we have completed construction and are waiting to place a tenant,” says Samuel. “After the tenant has moved in we convert the policy to a landlord policy, which is cheaper.”
What Does Home Insurance Cover When You’re Selling a House?
When you sell a property, you normally leave some of your personal belongings in it, such as furniture and appliances. If you’re still living in the home, your homeowners insurance policy will continue to offer the coverage you need.
“All policies cover the dwelling structure, fixtures and appliances,” says Tracy Cousineau, co-founder of Real Estate Expert Advisors, an Atlanta real estate firm. Homeowners insurance also covers your belongings and liability, such as an injury lawsuit against you if someone falls on your property.
It’s smart to review your homeowner’s policy before you get ready to sell your home, to find out what might be included in—and excluded from—your coverage.
What Kind of Insurance Do You Need When You’re Selling a Home?
Just as you buy homeowners insurance when you purchase a home, you may need different insurance when you sell, according to experts like Jeffrey James, an insurance agent from Tampa, Florida.
Your current homeowners insurance policy likely covers you for problems that can crop up during a home sale.
Dwelling and contents coverage. This coverage pays for damage to the house and your belongings. For example, if a real estate agent decides to start a fire in your fireplace for ambiance and causes smoke damage in the house, your home insurance can cover the damage.
Liability coverage. This coverage pays if you or any member of the household are responsible for property or bodily injury damage to others—most notably dog bites or slip and falls. If a potential buyer is injured on your property and you’re responsible, your liability coverage will kick in. For small injury claims by others, there’s medical payments coverage in a home insurance policy.
Does It Matter if Your Home Is Occupied or Vacant?
When you sell your home, if you’re still living there your current policy should be adequate. But if you have already vacated the property and you’re selling it empty, then you’ll need special vacant home insurance.
“This covers certain things that regular insurance policies do not cover when it comes to homes that are not occupied, such as vandalism, arson, fires and theft,” explains Jamie Safier, a real estate agent at Douglas Elliman in New York City. “It can be added on to your current policy or bought separately as its own unique policy.”
Safier says there are a few other scenarios where vacant home insurance is worth considering:
If it’s not your main place of residence, such as a vacation home that is empty for long periods of time.
If you travel for extended periods of time (more than four weeks).
If you have purchased the property but will not move in for over a month.
“Basically, you’ll want to consider a vacant home insurance policy any time you won’t be in the home for more than 30 days,” says Safier. Some states, such as Arizona, mandate that a home can’t be considered “vacant” until it’s been empty for more than 60 days.
If your insurer does extend coverage to your vacant house and there’s damage, you might get socked with a special deductible. For example, PURE has a 5% “vacant house deductible.” If your home is empty for more than 30 consecutive days before damage, the 5% deductible kicks in. On a home insured for $400,000, that’ll set you back $20,000.
The Limits of Vacant Home Insurance
If you want to sell a home that you’re moving out of, you’ll want to check with your insurance agent as soon as possible. And note that not all homes can get vacant home insurance.
“When looking to insure a vacant home up for sale, the insurance carrier or agent is looking to make sure the home still looks like it is in livable condition and it looks like someone lives there even if no one currently occupies the home,” says Jason Christiansen, co-founder of Young Alfred, an insurance site. “For example, there should be furniture in the home. A vacant home that has no furniture or is in bad condition could be at risk of abandonment.”
Homes that are abandoned or not maintained have a higher chance of problems and insurance claims. This makes the situation unattractive to insurers.
It took exactly six months after I took out the vacant home insurance policy before my house was under contract. The home finally sold without incident and without me having to file a claim.