A building is considered vacant unless at least 31% of its total square footage is rented to a lessee or sub-lessee. Vacant buildings are unoccupied properties for extended period of time making them more vulnerable to trespassing, theft, vandalism, fire, and other damages like water damage, glass breakage, electrical explosion, sprinkler leakage, and mold.
As per The National Fire Protection Association, in 2011-2015, U.S. fire departments responded to an estimated average of 30,200 structure fires per year in vacant properties. These fires resulted in an average of 60 civilian deaths, 160 civilian injuries, and $710 million in direct property damage per year. Because of this, in insurance perspective, a vacant building is a high risk compared to occupied dwelling.
Building: The limit set to replace or repair the property on a covered cause of loss. Most of the time, insurance company will insure a vacant building at an ACH or actual cash value, which is the Replacement Cost less the depreciation cost. The insurance company will provide coverage for direct physical loss, including fire, theft, vandalism and water damage, among other coverages.
Liability: The coverage provided to the business with protection against claims resulting from injuries to third parties and damage to other people's properties. Liability will cover defense cost, medical expenses of the injured third-party, settlement, judgement, attorney fees and other legal costs.
Mechanical Breakdown: The coverage for a loss or damage to hot water boilers & steam equipment, steam explosion of boilers, piping, engines & turbines. It is an important coverage to businesses like restaurants as it covers perishable goods spoilage and refrigeration contamination.
The common underwriting requirement to be able to bind Vacant Building Policy are the following:
No past, pending or planned foreclosure and/or bankruptcy or judgment for unpaid taxes against the named insured or any officer, partner, member or owner of the applicant individually within the past five 5years.
Insurance coverage has not been cancelled or non-renewed in the past 3 years.
Applicant is the owner of all properties
Building is totally vacant.
Building is not currently damaged by fire or otherwise.
Building is locked and secured from unauthorized entry.
Whether coverage is desired or not, any renovations planned during our policy term do not involve structural work.
No tenants have been evicted in the past 60 days and no one is in the process of being evicted.
Building is not scheduled for demolition during or after the policy term.
Being aware of the vacancy provision in the property policy can help reduce the potential likelihood of litigation and losses. This is why it may be essential to take the following steps:
Not more than 30% of the total building square footage is occupied, tenanted or inhabited.
Heat must be maintained within the premises at a temperature no less than 55 degrees Fahrenheit or all water supply lines must be completely drained.
The covered buildings shall be inspected at least once per week by the insured or insured's designated party.
All doors, windows and other means of ingress into the insured buildings shall be fully secured against unauthorized entry at all times.
All trash and debris shall be regularly removed from within and around the covered buildings.
The building is not, currently nor in the future, undergoing repair, remodeling or renovation whether structural, cosmetic, additions or ground-up construction.
No armed security is employed or contracted by you to perform any operations at the covered premises.
No ongoing daycare facilities on the premises.
No ongoing restaurant operations on the premises.
Noncompliance with the requirements, at any time during the policy period, renders this insurance null and void.