Vacant rentals – covered? Maybe not!

Having a property sitting vacant can not only mean no rental income, but it could also mean no insurance cover. Read on to find out why…

Did you know that there are times when your rental will not be covered by insurance, even if you have a policy in place? One of those times is when the rental is vacant (or unoccupied).  

By vacant, we don’t mean the short periods between one tenant moving out and another moving in. We mean when the property has been unoccupied for an extended period.  

There are numerous reasons why a rental may be vacant for an extended period. It may be by design, or due to circumstance. For example, if you tap into the student market, it may only be occupied during term-time. Or you could be renovating or undertaking major repairs. Whatever the reason, if your rental is vacant for a significant period, you may find your insurance is no longer valid, or that the coverage has been limited.  

Just what is a vacant property? 

Before we get into the reasons why a vacant property may not be insured, we should probably define what a vacant property is. Vacant means the property is entirely empty, without any personal property inside. Insurance providers consider a vacant property to be one that has not had anyone living in it for an extended period of time.  

Is there a definitive period of time? 

The maximum amount of time a property can be left unoccupied and still receive full coverage varies from insurer to insurer. It is usually between 30 and 90 days – for EBM RentCover policies, it’s 90 consecutive days. After 90 days, you need to seek EBM RentCover's approval for the policy to remain active without limits to coverage. Every policy is different, so check the specifics with your insurer. 

How does it work between tenancies? 

Usually cover remains in place during the tenant change-over period, so long as that period isn’t excessive of course. But it’s important to know that even though the insurance will usually continue to provide cover during the swap out (assuming there is a valid policy in place), some sections of the policy may not be applicable or certain risks may not be covered. The property is not likely to be covered for tenant-related matters like loss of rent or tenant damage while a lease is not in place, for example. Depending on the policy, the property may continue to be covered against other insured events like weather, fire or malicious damage. When it comes to protection against theft, an insurer may offer cover that is conditional on having installed specific burglary prevention measures (again, all policies are different, so check the specifics with your insurer).  

What’s the big deal with a vacant property? 

The thing about insurance is that it’s all about risk. And a vacant property poses risks for the insurer. 

Although a property minus tenants doesn’t pose the common tenant-related risks of loss of rent or tenant damage, vacancy actually increases other risks – like:  

• theft (not just contents, things like fixtures and metals such as copper pipes) 

• vandalism and graffiti 

• malicious damage  

• squatting  

• illegal dumping (which can lead to pest and vermin issues) 

• arson  

• undetected need for repairs  

• fire inception due to defective electrical equipment or undetected maintenance issues 

• general deterioration caused by adverse weather and  

• water ingress/damage. 

Basically, the risks fall into two main baskets – criminal activity and preventable damage. 

Preventable damage in more detail…  

When someone is home, damage can be prevented or rectified quickly. A prime example is burst water pipes. If this happens while there is someone in the residence, it can be addressed. If there’s no one there, it can take some time before it’s noticed, greatly increasing the risk of extensive water damage. In addition, when there is no occupant, the landlord or agent often can’t get to site quickly enough to protect the property from threats like fire, storm or other weather-related events.  

So, what happens if a property is left vacant? 

If the property is vacant for longer than the policy allows, it will be considered unoccupied. If a loss is suffered during the vacant period and the insurer wasn’t notified about the extended unoccupancy, the claim may not be paid, or the amount covered may be reduced. 

Meanwhile, if you let them know, the insurer may agree to continue cover. An additional excess on any claims that arise while the property is unoccupied is likely to be imposed or restrictions on coverage may be put in place. Cover, limits and premium costs for unoccupied and vacant homes vary, based on how long the rental will be empty and the steps the owner takes to protect the property, such as installing smoke detectors and alarm systems. Cover for tenant-related losses will be excluded.  

To summarise 

If your rental is vacant, you need to let your landlord insurance provider know. Unoccupancy can render the policy void, putting you at risk of losing more than just the rental income. 

If your investment property is vacant, get in touch with a member of our Expert Care team to discuss cover options – 1800 661 662. 

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are here, contact 1800 661 662 if you have any questions.