Insurance companies know certain things about vacancies:
Fact 1: Insurance companies know that things don’t stop breaking just because nobody lives there.
Fact 2: When something breaks and nobody is there to complain, what could have been minor often becomes major
Fact 3: Vandals usually prefer to inflict their handiwork on exposed property.
The consequence is that insurance companies equate high vacancy rates with greater exposure. So today, at a time in which it is sometimes unavoidable that a given property will have higher vacancy rates than its historical norm, a good property manager must properly manage vacant units and/or buildings. If not managed properly, the insurance company may elect to not renew, and worse, many carriers may not want to pick up where the old carrier left off, leaving the owner with little to no choices…..not a good situation.
In order to better ensure that insurance companies will want to compete for your business – even with exposure resulting from higher vacancy – don’t forget to take necessary steps. A good insurance broker will instruct you to take steps to mitigate exposure. You should heed the advice:
With documentation of above, a good insurance broker can argue that, despite vacancy, you are properly managing the property. Good coverage at a fair price is much more likely in such a case.
Another issue to consider is that some policies suspend or limit coverage for extended periods of vacancy. A good property manager should make sure to be knowledgeable of the policy.
Yet another consequence of today’s vacancy issues is that some property managements are electing to rent to tenant types with different risk profiles than what is stated in the policy. For example, if a mixed use property replaces a resident or office with an upholstery business, a dry cleaner or a medical facility, the risk has changed. Keep your insurance broker in the loop.
A good insurance broker might seem like a busy-body but that’s the job description.
by Linda Kelly, President - Exceptional Insurance; (561)353-0855