Does Landlord Insurance Cover Vacancy?

Summary: Most standard landlord insurance policies won’t cover a vacancy. However, there are different types of vacancies and different policies available. You can find coverage depending on your needs. Communicating with your insurance carrier is key to finding the right coverage and price for your rental. Estimated Read Time: 8 mins

Standard landlord insurance typically excludes coverage for vacancies caused by tenant turnover or lease expiration. Many policies limit or exclude coverage once a property has been vacant for a set period, typically 30 to 60 consecutive days, according to the Insurance Information Institute.

To ensure comprehensive protection, landlords should consider obtaining additional coverage, available at a higher premium. While acquiring vacancy insurance entails extra expenses, it is often essential.

Vacant properties are susceptible to risks such as vandalism, squatting, and undetected damage, which can result in substantial financial losses. Landlords have the option to add vacancy coverage to their existing landlord insurance policy or purchase it as a separate standalone policy.

Regardless of how you protect your home, it’s important to seek out policies and compare your options. Everyone has unique needs and properties. Be sure to protect yourself by comparing coverage with a licensed insurance agent.

Landlord Insurance Vacant Property Exceptions

There are many situations in which landlord insurance for a vacant property won’t cover you, however, there are also some vacancies and policies that may allow for coverage.

Vacancies in rental properties stem from various factors, including tenant turnover, seasonal changes, and natural disasters:

● Tenant turnover occurs when renters vacate before or at the end of their lease agreement, sometimes unexpectedly.

● Seasonal vacancies arise from demand fluctuations, particularly in tourism-driven markets.

● Natural disasters, like floods or fires, can render properties uninhabitable, leading to vacancies.

● Maintenance vacancies result from necessary repairs or renovations, temporarily making units unavailable.

● Long-term vacancies occur when properties remain unoccupied for extended periods due to factors like age or location.

Landlords must address vacancies promptly to minimize downtime and maximize returns on investment. If your property is going to be vacant for more than 30 to 60 days, you’ll also need to contact your insurance agent to notify them.

How Vacancies Can Affect Landlord Insurance Premiums

Coverage for an empty home is commonly limited after 30 to 60 days without occupancy, unless the insurer agrees to a vacancy permit or endorsement beforehand. While this permit may extend coverage for standard perils like fire and wind, it generally excludes protection from losses involving theft, glass breakage, or water damage.

Variations exist among insurers, so policyholders should consult their agent or representative for details. However, many insurers avoid insuring vacant homes, as they are more susceptible to such damage.

Some carriers are offering specific vacant home insurance policies, with premiums determined by factors such as security measures, winterization, and duration of vacancy. Keep in mind you’ll likely pay higher premiums than traditional coverage.

If you want to save more, regular check-ins by a designated individual may lead to reduced premiums. Still, expect to pay more. NerdWallet notes that vacant home coverage costs more than a standard policy because the property is a greater risk, and Triple-I estimates that even an ordinary landlord policy generally costs about 25 percent more than a standard homeowners policy.

A comprehensive policy should also include reimbursement for lost rental income due to building damage. The Insurance Information Institute notes that most landlord policies cover lost rent for a specific period while the property is repaired after a covered loss. Get a landlord insurance quote to compare your options in Texas.

Vacant vs. unoccupied: why the wording matters

Insurers often treat “vacant” and “unoccupied” differently. As NerdWallet explains, a vacant home is empty or nearly empty, often with utilities turned off, while an unoccupied home still has enough furniture that someone could move back in at any time. A rental between tenants, with the last tenant’s belongings gone, usually looks vacant. Some policies define these terms precisely and some don’t define them at all, so read the conditions section of your landlord policy and ask your agent how the insurer applies them.

Why insurers restrict coverage on empty rentals

Triple-I explains that vacancy clauses exist because empty properties carry more risk: undetected leaks and burst pipes, theft and vandalism, fire from electrical problems, and liability if someone is hurt on the property. Water is the big one. Triple-I estimates that repairing damage from a burst pipe can cost $10,000 to $70,000 or more, depending on how long it goes unnoticed. Thieves also target vacant homes for copper piping, appliances and fixtures, and squatters can create legal costs and delays.

Texas landlords have seen how quickly this can go wrong. During the February 2021 winter storm, the National Weather Service in Houston recorded extreme cold that lasted for several days and brought power outages, loss of heat and broken pipes across Southeast Texas. In an occupied rental, a tenant can shut off the water. In a vacant one, a leak can run for days.

A simple example

Say a landlord in Fort Worth has a single-family rental that sits empty for 75 days between tenants while it is repainted and listed. The policy’s vacancy clause limits coverage after 60 consecutive days, and the landlord never told the insurer. A hard freeze splits a supply line, and water runs through the house for a week. Depending on the policy wording, the insurer could deny or reduce the claim because of the vacancy clause. If the landlord had called before the 60th day and added a vacancy permit or endorsement, kept the heat on and had the house checked regularly, the outcome would likely have been very different.

Your options when a Texas rental will sit empty

• Tell your insurer first. Triple-I’s advice is to always notify the insurer if a property will be unoccupied for an extended period. Call before the vacancy period in your policy runs out, not after.
• Ask for a vacancy permit or endorsement. NerdWallet notes that you may be able to add an endorsement to your existing policy instead of buying separate insurance, depending on how long the property will be empty.
• Buy a vacant home policy. For longer vacancies, specialty policies are available. NerdWallet reports these are often sold in three-, six- and 12-month terms.
• Review the policy type. A basic dwelling form covers fewer perils than a broader one. Our page on Texas DP-1 insurance explains the most basic rental dwelling form, and our landlord insurance overview compares the options.

What vacant home coverage typically includes

According to Triple-I, vacant home policies and vacancy endorsements typically cover water damage from plumbing or heating failures; fire, lightning, windstorm and hail; theft, vandalism and damage caused by trespassers; and liability if someone is injured on the property. They cost more than standard coverage, and insurers usually expect you to take reasonable steps to maintain the property. Triple-I warns that failing to heat a home in winter could void coverage even under a vacant home policy.

What landlord insurance does not do during a vacancy

Loss of rent coverage is often misunderstood. Progressive explains that it may pay lost rental income when the home is uninhabitable because of a covered peril, such as a tree falling on the house. It does not pay for ordinary vacancies between tenants or for rent lost because a tenant loses a job. Turnover time is a business cost, not an insured loss.

Vacancy can also affect your ability to keep or find coverage. The Texas Department of Insurance lists a house being vacant for 60 days or more among the reasons a company might not renew a policy, and the Texas FAIR Plan lists vacant property among the reasons it may deny an application. Our guide to cancellation, nonrenewal and lapse in Texas explains what to do if that happens.

How to protect a vacant rental

Triple-I recommends these steps for any home that will sit empty:

• Keep the thermostat at least 55°F during winter months.
• Shut off the water supply or fully winterize the plumbing.
• Lock doors and windows, and consider reinforced locks.
• Install leak detectors, smart thermostats or cameras for early warnings.
• Have a neighbor, family member or property manager check the home weekly.
• Keep walkways and lighting in good shape to reduce slip-and-fall risk.

NerdWallet adds that keeping up with yard work helps a property look lived in. Keep a simple log of each visit, with the date and what was checked. That record can help if you ever need to show the insurer the property was maintained.

Common mistakes landlords make

• Waiting until a claim to mention the vacancy. The time to call is before the vacancy limit is reached.
• Assuming renovations count as occupancy. Contractors working during the day may not make a house “occupied” under your policy. Ask your insurer.
• Turning off the heat to save money. It can cost far more if pipes freeze.
• Expecting loss of rent coverage to pay for turnover. It only applies after a covered loss.
• Leaving liability uncovered. Triple-I notes that liability exposure continues even when no one lives in the home.

Frequently asked questions

How long can a rental property be vacant before coverage is affected?

It depends on the policy, but Triple-I says vacancy clauses typically apply after 30 to 60 consecutive days. Check the exact number in your policy conditions.

Does landlord insurance pay rent while I look for a new tenant?

No. Loss of rent coverage pays only when the property can’t be rented because of damage from a covered peril.

Is a vacant home policy worth it for a short vacancy?

For a few weeks, an endorsement or simply staying within your policy’s vacancy period may be enough. For longer vacancies, such as a major renovation or a slow sale, a vacant home policy is usually the safer choice. Our article on the cost of landlord insurance in Texas covers what drives rental property premiums.

Sources:

1. A Vacant Home Still Needs Insurance Don’t Be Caught Without Coverage, III. Accessed February 2024. 
Insurance Information Institute (iii.org)

• When No One’s Home: Understanding the Role of Vacancy Insurance, Insurance Information Institute (Triple-I)
• Coverage for renting out your home, Insurance Information Institute (Triple-I)
• Unoccupied and Vacant Home Insurance: What to Know, NerdWallet
• Landlord insurance, Progressive
• Valentine’s Week Winter Outbreak 2021: Snow, Ice, & Record Cold, National Weather Service, Houston/Galveston
• Coverage eligibility, Texas FAIR Plan Association
• Was your home insurance canceled or not renewed?, Texas Department of Insurance
• A Consumer’s Guide to Home Insurance, National Association of Insurance Commissioners (NAIC)