Who needs empty property insurance cover?

New data shows that the number of empty homes has risen for the first time in a decade.

Just what this means and why it is happening, isn’t necessarily clear.

A contradiction

Almost everyone will be familiar with the regular reports in the media relating to the chronic shortage of housing. This is particularly prevalent in the social housing and first-time buyer market segments.

This makes the statistics mentioned above puzzling, to say the least. Just why so many properties are sitting empty remains unclear but there are certain explanations including:

• In “what to look for as a first time buyer” and similar articles, many first-time buyers are warned on the importance of inspecing a property for damage and repairs. Often is the case that some properties are in extremely poor condition and require renovation to an extent that first-time owners cannot fund.

• in some cases, properties are being purchased as an investment and deliberately kept unoccupied pending anticipated rises in housing prices;

• no doubt some of the empty properties are at the very top end of the marketplace and carrying very significant price tags as a result. Buyers for such properties may not be in plentiful supply in the current financial environment;

• even those properties which are in reasonably good condition and towards the lower end of market prices, still remain too expensive for first time buyers;

• some families are inheriting properties but can’t immediately do anything with them due to family asset distribution disputes etc.

It should also be noted that this current statistic may or may not be part of a much longer-term trend. The number of empty homes increasing in a single period may not be mean anything in terms of future surveys.

Whatever the explanation, it is clear that there are large numbers of empty properties around and that might have implications for insurance cover.

Why empty properties affect insurance

Whether you’re an owner-occupier or a landlord, your property insurance will typically cover periods when your property stands unoccupied – up to a point.

A lack of occupation can happen for many routine reasons. Tenant changeovers, extended tenant holidays or owner-occupier lengthy business trips, are just a few examples.

None of these situations is likely to be an issue for your existing property insurance but that is only the case providing the period without occupants does not exceed a specified period of time. That will typically be outlined in the policy and usually expressed as a maximum number of consecutive days without occupants (usually somewhere between 30-45 days).

If your property is going to sit unoccupied for longer than the maximum number of allowable days specified in the policy, then your existing insurance cover may be at risk and claims you make against it refused. To ensure continuity of protection for your property in such circumstances, you will need to take out specific unoccupied property insurance.

That typically applies equally to owner-occupied and let properties.

Empty versus unoccupied properties

As an important point of detail, it is worth clarifying that insurance providers typically do not differentiate between properties that are unoccupied or empty, where “empty” simply reflects the fact that the property is unfurnished.

In both cases, once you exceed a specified number of consecutive days, you will need unoccupied property insurance.

Derelict or uninhabitable properties

A final comment on the subject of empty properties is worth taking into account when the property concerned is derelict or otherwise defined as being uninhabitable.

In some situations, such properties may benefit from a special type of unoccupied property insurance called “renovation insurance” – although the exact terminology may differ from one provider to another.

Summary

Whatever the cause is, if you’re a property owner and your property is now standing unoccupied, you should carefully consider the position and if appropriate, purchase unoccupied property insurance in order to protect your interests going forward.