5/24/2018 By Agent Ken CobbBy Agent Ken Cobb
When people buy a new home, move to a new town or move into assisted living, often they may still own their old home for a period of time afterwards. Perhaps the plan is to put their home on the market or rent it out. Sometimes the home sits vacant for a while. In any case, the question comes up: If I move out of my old home, can I keep the insurance policy I already have, or will I need different insurance coverage?
This really comes down to who (if anyone) will be living in the home. Residential insurance policies are set up based on occupancy. Different policies allow for different occupancy situations, and when the occupancy changes, you often need to change policies. So who will occupy the home now that you have moved? Will a relative move in? Will you rent it out? Will you use it as a secondary residence? Or will it be unoccupied or vacant?
It’s likely that your old home is currently covered by a Homeowners policy. Homeowners policies are specifically intended only for owner occupied homes. So if you (the owner of the home) will no longer be living there, your old home will need a different kind of policy to insure it.
If you will be either renting out the home or having a friend or relative live there, you will probably need to switch to a Dwelling Fire policy. Dwelling Fire policies allow someone other than the owner to live in the home but are similar to Homeowners insurance in many respects. However, they typically don’t have the same coverage bells and whistles and are sometimes written with more restrictive perils and settlement terms. In addition, most Dwelling Fire policies are written with little or no personal property coverage, since it is the responsibility of the resident to buy their own Renters policy.
Because the risk of loss is perceived to be higher when someone other than the owner is living in the home, Dwelling Fire policies tend to cost more than Homeowners policies, at least when comparing the coverage being provided. While they are more flexible on who lives in the home, standard Dwelling Fire policies do require that the home be occupied by somebody.
So if no one will be living in the home while you put it up for sale, complete renovations or figure out what to do with it, you will need a third type of policy - a Vacant Dwelling policy. Technically this is a special version of Dwelling Fire coverage that allows for vacancy. A vacant home is considered much more risky, which is borne out in both the premium you will pay and the coverage you will receive. You may well pay as much or more for a Vacant Dwelling policy with far less coverage than you did for the Homeowners policy you previously carried.
As far as the restrictions in coverage found in Vacant Dwelling policies, covered perils tend to be more limited and loss settlement terms more restrictive. As an example, a Vacant Dwelling policy might not cover water damage resulting from a broken pipe, or it might deduct for depreciation rather than paying for the full cost of covered repairs. A Vacant Dwelling policy will probably be written only for the current value of the home, not what it would cost to rebuild it. It’s really a bare bones policy, compared to either a Homeowners or standard Dwelling Fire policy.
There is a scenario in which you might be able to keep your existing Homeowners policy in place - if you are moving your primary residence but plan to continue living in your old home on a secondary basis. For example, perhaps you bought a new home in another town because your spouse got a new job, but you’re still working in your old town and living at your old home all or part of the week. If you still have the home furnished and setup for living and are living there at least part time, your current Homeowners carrier may allow you to continue your policy, although they might make some changes in coverage or rate to reflect that it is now just a secondary residence.
Perhaps when moving out of your old home, the path of least resistance might seem to be to put off informing your insurance company or agent. Why not leave well enough alone? You are happy with the rate you are paying now and see no need to potentially pay more premium for less coverage. Unfortunately, this could prove financially devastating if a loss occurs your claim is denied. Because your current Homeowners policy is only intended for owner occupancy, it may have provisions that potentially void coverage if you are no longer living in the home (such as the common “where you reside” policy definition, or various carrier-specific terms and conditions).
So how long will you have to replace your policy after you move out? Really, this may depend on your insurance carrier. Some carriers may agree to insure your home until its next renewal. In other cases, a carrier might require (or have policy language requiring) you to get a new policy within a certain period of time, such as 30 or 60 days. Due to concerns with the common “where you reside” policy definition referenced above, it’s probably best to get this arrangement confirmed in writing with the carrier.
I hope you found this post informative and educational. If you have any questions about covering your old home after you move out, I’d love to hear from you!
In referring to the coverage provided by a “standard Dwelling Fire policy” above, we have in mind a DP3 (“Special Perils”) policy. Other, more restrictive Dwelling Fire policies are also offered and sold in the marketplace.
About the Author
Agent Ken Cobb
Ken is the owner and principal agent at Pine Country Insurance in Bemidji. Active in the insurance industry since 2000,Ken uses his years of personal insurance knowledge and experience to assist clients in customizing insurance coverage to fit their needs. Ken considers himself a "farmer" rather than a "hunter"; rather than focusing on writing a lot of new policies as quickly as possible, he works on cultivating long term relationships based on trust with his clients. When writing new policies and meeting for annual reviews, Ken spends time with his clients explaining and helping them understand their insurance, and he is also pleased to share his knowledge with his blogging audience as well.
Ken Cobb is owner of Pine Country Insurance and has been active in the insurance industry for over 15 years. Meet Ken.
Coverage descriptions found in this blog are summaries provided for general educational purposes and cannot fully detail the terms, conditions, limitations or exclusions of a specific insurance policy. Please read your policy carefully.