Types of Property Insurance

Q: In a recent column, you printed a letter from a reader who said that his second home was vacant while being sold.
 

A pipe burst in the house and the insurance company denied the claim.

There are a couple of things that the owners of the property should follow up on. First, the insurance company should have sent the owners a letter stating the reasons for denial. It’s possible that the company may have gone beyond the vacancy to the cause of damage not being covered.

If it is true that their claim was denied because the house was vacant, it’s possible that the owners were sold an incorrect policy. Were they forthright with the insurance agent or insurance company that this was a second home and that it would not be occupied at all times? If they were and they were sold a policy that later denied a claim because it was the wrong policy, that would be an issue to explore.

Was the property bought as a rental? Most insurance policies include a period of time in which the home can be vacant and still covered under the policy.

The owners need to verify that they purchased the correct policy for the situation (and decide if they were honest about what the status of the house would be). If an incorrect policy was sold to them, they can go back to the agent to recover the damages under the agent’s own errors and omissions insurance policy.

A: Thanks for the follow-up to that question. I believe that the owners initially lived in the house, and then rented it. Once the renters vacated the property, they listed the now vacant house for sale – which is when the pipe burst and caused the damage.

The owners should have checked to make sure that they had the correct form of insurance for the house (they could have easily called to check), but this is a common mistake homeowners make. Homeowners who move out of their homes and leave the home vacant – not just unoccupied – risk having the insurance company invalidate a claim they file against their insurance policy.

You've made some good points. Thanks for taking the time to write.

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