Even empty it is still valuable.
Most homeowners are not aware that their house needs special insurance coverage if it becomes unoccupied, is vacant, or if someone else is living in the home.
In order to have all of the coverage your typical home policy covers, you must purchase a vacant home policy. There are additional underwriting criteria for these policies and generally they require that you keep the utilities on, lawn maintained and someone must inspect the property on a regular basis. Some vacant home policies will require higher deductibles, co-insurance and might only cover for actual cash value, which is for the depreciated value.
Some people prefer to rent out a house that they no longer live in. In these situations you will also lose coverage and risk being denied for claims if you keep your standard home insurance policy. Rental homes require a rental dwelling policy. These policies cover the additional risk of having a person living in the home who does not own the home. Generally tenants do not care for a property as well as the building owner would. Also, these policies have a lower amount of personal property coverage, as most of the personal property on the premises belongs to the tenant. You are also covered for loss of income on these policies, which pays you the fair rental value if you have a claim and are not able to rent out the home while it is being fixed.
Whether you’re adding a porch outside, a deck in the backyard, or installing kitchen cabinets, you should always speak with your insurance company to determine if you need to adjust your policy. Whenever you add to or extend your home, you increase its value. If something happens to your home after you’ve made the addition, you want to ensure you’re covered for the increased amount of your home’s value. If you don’t adjust your homeowners insurance policy and something horrible happens, you’ll only be covered up to the amount of your home’s prior value.
The second reason to adjust your policy is to protect your financial assets in the event someone is injured while working on your home. Often, the contractors you hire will have workers’ compensation insurance. It’s purpose is to protect you from claims made in the event one of the contractors is injured. But, you need to make sure they have the insurance. Ask the people who are working on your home if they’re properly covered. Similarly, contractors should have liability insurance. This will protect you in the event a contractor does something that causes damage to your home during the renovation.
You should consider home insurance for your new home during construction. If you don’t, you may be exposing yourself to a great deal of risk if a fire, theft, or other event damages or destroys your partially-completed home.
One way to cover your new home during construction is by purchasing a standard homeowners insurance policy. This will cover you for any damage to the building as it’s being built, and may also provide some coverage for theft of building supplies (although the contractor’s insurance should also cover this). It also provides liability coverage, which may come in handy if one of your friends trips during a “tour” of your dream house and decides to sue you. However, the policy will not cover your personal property until the building is secure or “lockable.” Once construction reaches this point, you can add on homeowners insurance coverage for your personal property.
Another option is to purchase a “dwelling and fire” policy. This type of policy covers damage to the physical structure, but provides no theft coverage. A dwelling and fire policy may be an appropriate choice if you are living in your old house during construction, because the homeowners policy on that house would cover theft of items from the construction site. Dwelling and fire policies also provide liability coverage, just like a standard homeowners policy.
Once the building is complete, you should re-evaluate your coverage. If you opted for dwelling and fire coverage, you may need to purchase a full homeowners policy. If you bought standard homeowners insurance, make sure you have purchased the right amount of insurance, especially if you have made alterations to the original building plans (e.g., adding on a room or upgrading building supplies).
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Frequently people go for years without reviewing their insurance program, even though life quickly changes. By answering a few questions, you can have the peace of mind knowing that your family and possessions are protected.