Friday, September 27, 2013

Property Insurance Mistakes That Could Cost You

The occupancy status of a piece of property often changes. It could be a home that is left empty for an extended period while the family is away or an office that is no longer operational with no one to occupy it. If the property has been insured, it will have been done so with reference to a specific type of occupancy. These would include:
  • Owner Occupied, Primary and Secondary – i.e. Homeowner’s policies
  • Tenant Occupies – Fire, Dwelling and Rental Property policies
  • Course of Construction (COC)
  • Vacant property

Any insurance policy taken on property is conditional on the occupancy status remaining unchanged. If a change occurs and the necessary amendments have not been made to the policy, most or all of coverage may be lost.

What Can Happen And Why

An owner occupied primary residence is the main home of the family which is where they live most of the time. Because the house is in regular use and is not left empty the structure and its contents are thought to be reasonably safe from damage, theft or other forms of loss. Because of this the owner occupied primary residences usully get the best coverage at the best rates.

An owner occupied secondary residence will be a vacation home, a ski cabin or other place where the family spends a part of their time, but which is unoccupied for the large part of the year. These homes are fully furnished, like the primary residences, but since they are left empty for extended periods, the risk factor and chances of loss are greater. Coverage for such residences will cost more than that of the primary. They also usually have less coverage for theft and loss of personal property. In addition there are a few coverage limitations such as that of water damage from freezing pipes etc. In many cases, an insurance company will offer coverage for a secondary residence only if the primary residence is insured with them. What often happens is that a secondary home is used for vacations and also rented out during periods when it will not be owner occupied. If this happens and the insurance policy is a homeowner’s one, it is null and void. The proper insurance for this kind of property, with double use, is that of a rental property which will provide coverage when owner occupied and also when given on rent.

If a property is covered by homeowner’s / rental property insurance and is under Course of Construction the insurance company must be informed within 30 days and a request made to add COC coverage to the policy, If this is not done, a number of coverages such as theft of building materials, wiring, plumbing, appliances and so on may be lost. Construction site theft is increasing across the country because of the rising costs of copper and other material and fittings.

If a home is left vacant for over 30 days and the insurance company not informed and a vacant home policy obtained, the property will not be covered. This is because a vacant home, with all the valuable items inside it, is at high risk in terms of theft. This vacancy can be for a variety of reasons including short term change of residence, awaiting sale, repossession bankruptcy etc. Whatever the reason, a vacant home policy is essential. A vacant home is different from a secondary or vacation home which is classified as unoccupied and not vacant so the polices that apply are different.

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