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Thread: Homeonwners insurance cancelled due to house being vacant?

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    Veteran Member TheLioness's Avatar
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    Default Homeonwners insurance cancelled due to house being vacant?

    This may be in the wrong section but hopefully someone knows the answer.

    Here's how it happened:

    I have my car insurance with the same company that holds our homeowners insurance. We decided to sell the house and move back to my husband's smaller, more private house that he had before we were married and never sold. When we moved, I changed my address with the insurance company like I thought I was supposed to. I didn't realize that they wouldn't insure a vacant house. Next thing we know, the insurance company calls and says our homeowner's policy is being cancelled because the house is unoccupied.

    Here's what I've done so far:

    I tell them that we're going to rent it until it is sold (which was a lie) and she says she'll be out in a couple of weeks to take pictures to prove that it is occupied. *&^%%$!!!!! What are we supposed to do now? I called another agent that I know and he said that if his company insured the house we live in now, they would provide temporary insurance for 1 year, but my husband just renewed the policy a few weeks ago.

    The dilemna:

    The bank that holds our mortgage requires us to carry homeowners insurance. But we can't get insurance on an unoccupied house! We could if we wanted to triple our yearly premium and that would only cover major stuff like fire, etc. Not vandalism or anything like that. Besides with 2 house payments we really can't afford to triple our insurance premium and who knows how long it will be before the house is sold thanks to our current economy status.

    The question:

    Does anyone know of any insurance companies that will insure an unoccupied house at a reasonable rate? It's only about 10 minutes from where we live so it's not like we never go by there but they don't take that into consideration.

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    Default Re: Homeonwners insurance cancelled due to house being vacant?

    Could you maybe get your husband's mail at one house and your mail at the other house? Not sure if this is legal or not, but that way you wouldn't have to change the address on everything. Especially if you're not going to rent the first house out, what's the harm in mail going there? Then you'd still keep the insurance paperwork going to the first house...

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    Banned Melonie's Avatar
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    Default Re: Homeonwners insurance cancelled due to house being vacant?

    The bank that holds our mortgage requires us to carry homeowners insurance. But we can't get insurance on an unoccupied house! We could if we wanted to triple our yearly premium and that would only cover major stuff like fire, etc. Not vandalism or anything like that. Besides with 2 house payments we really can't afford to triple our insurance premium and who knows how long it will be before the house is sold thanks to our current economy status.

    Actually you may have a more serious problem than insurance. Most 'reasonably priced' mortgages also require that the mortgage borrower live in the house i.e. that it be used as a primary residence, that it not be put on the rental market, and that it not be left vacant. If your homeowners insurance is allowed to lapse such that your mortgage lender is notified, with the bad news in the mortgage lending market these days your mortgage bank may become VERY upset with the fact that you are no longer physically occupying 'their' house. This could result in your mortgage being 'called'.

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    Veteran Member TheLioness's Avatar
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    Default Re: Homeonwners insurance cancelled due to house being vacant?

    I guess I need to seriously sit down and make some calls today then. Hopefully if I can just get someone to insure it everything will stay as is. I can't go back to our current insurance company and tell them we're staying there. She'll know we're lying, and she'll want pictures The premium is paid up until the end of May, so can they still cancel it before then?

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    Banned Melonie's Avatar
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    Default Re: Homeonwners insurance cancelled due to house being vacant?

    The premium is paid up until the end of May, so can they still cancel it before then?
    technically yes for both the insurance company and for your mortgage lender, since you are arguably in breach of contract conditions on both counts.

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    Veteran Member TheLioness's Avatar
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    Default Re: Homeonwners insurance cancelled due to house being vacant?

    Ok, well I've got an insurance agent looking into options. But what do people generally do when they move to a different house and put their other one on the market? I see that happen all the time...when a house for sale is vacant Are there proper steps to follow?

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    God/dess Zofia's Avatar
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    Default Re: Homeonwners insurance cancelled due to house being vacant?

    Quote Originally Posted by TheLioness View Post
    Ok, well I've got an insurance agent looking into options. But what do people generally do when they move to a different house and put their other one on the market? I see that happen all the time...when a house for sale is vacant Are there proper steps to follow?
    Stay in it. The insurance industry believes, correctly, that if a house is occupied, then the risk of loss is lower and the size of any loss will be less. For example, an unoccupied house with a pipe that bursts will likely have much more damage before anyone checks and turns off the water. Conversely, if the house is occupied, someone will see/hear the leak and turn off the water before the damage becomes too great.

    If you cannot physically stay in the house until it sells, find a friend or relative to move in while you are gone. My dad did that for me on my fix and flip. He enjoyed a free vacation, and I get out of the old house and into the new one.

    XOXO
    Z

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    Default Re: Homeonwners insurance cancelled due to house being vacant?

    Quote Originally Posted by Melonie View Post
    Actually you may have a more serious problem than insurance. Most 'reasonably priced' mortgages also require that the mortgage borrower live in the house i.e. that it be used as a primary residence, that it not be put on the rental market, and that it not be left vacant. If your homeowners insurance is allowed to lapse such that your mortgage lender is notified, with the bad news in the mortgage lending market these days your mortgage bank may become VERY upset with the fact that you are no longer physically occupying 'their' house. This could result in your mortgage being 'called'.
    Really?? How do people that have multiple rental properties (houses) work mortgages?

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    Default Re: Homeonwners insurance cancelled due to house being vacant?

    Simple, they pay more, it is a different kind of loan and a differnt kind of insurance.

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    Default Re: Homeonwners insurance cancelled due to house being vacant?

    The insurance industry believes, correctly, that if a house is occupied, then the risk of loss is lower and the size of any loss will be less. For example, an unoccupied house with a pipe that bursts will likely have much more damage before anyone checks and turns off the water. Conversely, if the house is occupied, someone will see/hear the leak and turn off the water before the damage becomes too great.
    Really?? How do people that have multiple rental properties (houses) work mortgages?
    As Zofia begins to point out, there is a major difference between a 'personal use' loan made to an individual, and a 'commercial use' loan made to a business. Whether this involves a house or a car, the lender makes the 'personal use' loan on the assumption that the borrower will be the primary user. Again whether this involves a house or a car, the insurer writes the policy on the assumption that the borrower will be the primary user.

    As soon as the scenario changes from personal use to commericial use the terms of the loan and the cost of insurance coverage change greatly. Suddenly the 'owner' is no longer the primary user ... and instead the house may be occupied by a long series of rental tenants, or the car may be driven by a long series of rental customers. Suddenly the people living in the house or driving the car have no 'skin in the game' i.e. they are not personally affected in any major way if the house roof leaks or the car gets dented. Therefore the lender and insurer factor in extra costs from the beginning in order to cover the statistical fact that houses or cars used commercially will sustain more wear and tear than houses or cars that are exclusively used by the borrower / owner.

    Lioness' potential problem is that she signed on to a mortgage loan that was granted under terms of personal use i.e. as the primary residence of the 'owner'. Once she is no longer residing in the property, risk factors for the mortgage lender and insurer go up. If she rents the property, risk factors for the mortgage lender and insurer go up even higher.

    Given that mortgage lenders and insurance companies are already taking 'heavy hits' from bankruptcies / foreclosures / empty houses / houses occupied by 'squatters' / houses being stripped of aluminum siding and copper plumbing etc., Lioness' mortgage lender and insurance company are very probably going to expect that either A. they can pry more money out of Lioness to cover their higher risk factors, or B. they can foreclose on the property before it is exposed to probable damage as a result of being vacant / being occupied by renters or 'squatters' / being stripped for it's scrap copper and aluminum etc. in order to minimize their potential losses !

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    God/dess Zofia's Avatar
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    Default Re: Homeonwners insurance cancelled due to house being vacant?

    Quote Originally Posted by jester214 View Post
    Really?? How do people that have multiple rental properties (houses) work mortgages?
    Commercial loans. The lending standards are different, the interest rates, typically are higher. At least until you establish a great track record. Then you might be able to borrow at the prime rate.

    For insurance, you cannot get homeowners for rental property. It's a different product completely, several products in reality. Sometimes called fire insurance, or rental property insurance, a landlord will also need a CGL policy, commercial general liability. These products combine to provide coverage that is similar to homeowners. However, since the insurance company is taking bigger risks with rental property, the rates tend to be higher. Each CGL policy is individually underwritten. (In theory.) The underwriter takes into account the individual commercial risk and makes a judgement about the appropriate rates. I say in theory because it is impossible for the insurance industry to have perfect knowledge about each different type of commercial opperation, so they tend to have broad categories that they lump risks into. The tend to charge rates fairly uniformly within those broad categories. Unless, a particular risk starts making a lot of claims. Then they raise the rate.

    XOXO
    Z

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