Vacant or Unocupied Buildings Pose Financial Risk

While downsizing is unavoidable in a tough economy, business owners have to be aware of the additional exposure they create after vacating buildings they own.

Insurance settlements for claims at unoccupied locations can be considerably less than payments for claims at occupied buildings. In the insurance arena, a vacant structure is one that has been unoccupied for 60 consecutive days. When that happens, the vacancy clause in policies is triggered, which removes coverage for occurrences such as acts of vandalism and water damage. Also, payments for other covered perils will be reduced by 15 percent.

Because insurance carriers frequently find out about a vacancy only after a loss, they are not required to notify clients of coverage changes due to vacancies. Also, reductions in coverage caused by vacancies do not decrease premiums because vacancy clauses are part of original policies.

A building is considered vacant or unoccupied if less than 31 percent of the structure’s square footage is leased to a third party or it is not used for normal operations for 60 or more consecutive days. Vacant buildings require special underwriting, so request a proposal for coverage during periods of vacancy.

Premiums for unoccupied buildings are higher than standard premiums because of increased exposure for vandalism, theft, frozen pipes and other occurrences, but a vacant building policy provides full coverage.

Seemingly harmless situations can wallop your wallet 

There are some dangerous words concealed in homeowners’ insurance policies that could crush someone’s hopes of receiving a claim payment if there is no one home at the time of an occurrence. The problem is with the definition of residence premises, which is defined as the dwelling where the insured lives.

According to the Independent Insurance Agents & Brokers of America, there are interpretations and court decisions of the phrase "residence premises" that state if the person named as the insured and/or that individual’s spouse no longer live in the insured home, then coverage is terminated.

Under such interpretations, coverage is not applicable if a senior citizen’s home is vacant after the person moves to a long-term care facility; homeowners move to a new house while their former residence remains on the market and empty; or someone purchases a home but does not move in until renovations are completed.

Other situations of concern include:

• Foreclosures.

• Rentals.

• A child moves into a parent’s home.

• A parent moves into a child’s home.

• Divorce.

• Death of an insured.

• Trusts.

• Dwellings owned by a limited liability corporation or a corporation.

• Seller remains after a closing.

• Seller vacates or buyers moves to a building before a closing.

Holiday lights can generate safety hazards

Appearances can be deceiving, even when it comes to Christmas lights. Just because strands still work doesn’t mean they are safe.

You should dispose of holiday lights after using them for three seasons to avoid safety risks created by frayed or cracked wires, loose connections and broken sockets.

In addition, you should:

• Replace broken or missing bulbs.

• Never string more than three standard-size sets of lights together; doing so can overload wires.

• Use the gripping area of the plug to disconnect lights instead of pulling the cords, which can damage wire and insulation and expose you to a shock.

• Store small bulbs and fuses so they are not accessible to children.

• Make sure the Underwriters Laboratory (UL) label is on strings of lights and other electrical decorations. The label should be attached to the cord not just marked on the package. Indoor lights have green holographic UL marks and indoor/outdoor lights have red holographic marks. Lights without a UL label might be counterfeit and a fire hazard.

• Use hooks or clips designed for hanging strings of lights. Do not use staples or nails.

• Turn off lights before heading to a social engagement or retiring for the evening.

• Keep lights where they will not get damp or wet.