Homeowners Insurance for an Unoccupied House

Homeowners insurance is often confused with Household Insurance. Household insurance provides cover for the content of your house—furniture, clothes, jewellery, any valuables that can be removed. Homeowners insurance protects your house itself, the buildings, structures and other improvements on the property such as tennis courts, swimming pools, outside walls and electrical fences.

When you take out Homeowners Insurance the amount is based on replacement value, not market value. The market value refers to the amount of money you will be able to sell your house for while the replacement value is what it will cost be rebuild your house in the case of a total loss. Current building costs determine the replacement value of a property.

If you take out a home loan the bank will make it a condition for approval that you take out a homeowners insurance policy. In the past the banks forced clients to take the insurance through an insurer of the bank’s choice. Since the full implementation of the National Credit Act in June 2007 this practice is no longer allowed. You are free to take out your homeowners insurance with any insurer of your choice but the policy must be ceded to the bank. The bank requires this as security to ensure that they will be in a position to recover the outstanding amount on your home loan in the case of a total loss. The policy must be ceded to the bank for as long as there is an outstanding amount on the loan.

Most homeowners policies cover more than just the bricks and mortar. Broken windows, bursting pipes, geysers and malicious damage are usually included in your cover. The golden rule with insurance, don’t’ take anything for granted, is also applicable in this case. Read your policy document, no matter how boring you may find it, and make sure you know exactly what you are covered for. You need to be familiar with any exclusions and limits of indemnity.

The onus is on you to ensure that your cover is sufficient; for this reason it is a good practice to review all your insurance on a yearly basis. Your insurer must be informed of any changes to your property, also if you let or sublet the house.

Should you decide to extend your home, for example, build on that granny flat for your ageing parents, you must inform your insurer. It may come as a surprise but your existing policy provides no cover on the building operations. You need a Contractor’s All-Risks policy for this purpose.

What happens if you go on an extended overseas holiday and your home will be unoccupied for a long period of time? You may have remembered to advise the security company but do you know that you also need to advise the insurer who issued your homeowners insurance policy?

Again, check the details on your policy document. Most insurance companies will cover you against malicious damage to your home for a period of 30 days only when the property is unoccupied, sometimes 60 days, confirm the details. Rather be safe than sorry, always advise your insurer even if you are going to be away for only 30 days at any given time.

Therefore, if your property is unoccupied or illegally occupied for longer than the stipulated period you will have no cover for the following perils: theft, fire, explosion and accidental damage. In Insurance terms it is called the “vacancy clause.”

If you are planning to leave your house unoccupied for longer than the agreed period you may run into some tough challenges. Your insurance company may only be prepared to give you limited cover or refuse to continue with any cover at all. In this case it will be best to employ the services of an insurance broker to arrange the cover for you with a company that is prepared to accept the risk. The cover will increase the longer you leave the house unoccupied and can become very expensive.

A better solution may be to use the services of a house sitter. If you do not know anyone who can do this for you, shop around on the Internet, there are companies who will take care of this for you.