Military Financial Advice - Military Times

Beware spiking insurance rates for vacant home: Officials advise shopping around for best policy

An Army major has discovered another unfortunate expense associated with trying to sell his house in a lagging housing market: the cost of homeowner’s insurance for a vacant home.

Until he and his family moved from their home near Fort Stewart, Ga., in June, Maj. Diogo Tavares paid an annual premium of $566 for homeowner’s insurance. He just found out that if he sticks with the same company, he’ll pay $11,626 a year for insurance on a vacant home.

Tavares found out when he called his insurance company, Boston-based Homesite Insurance, to give them his new address.

Homesite representatives asked if the house was vacant and required him to provide information for an updated insurance policy, he said.

“I thought it would be cheaper, because none of our personal goods are there,” he said.

He has never filed a claim on the house, which has an alarm system connected to local fire and police departments. Neighbors also are keeping an eye on his property, he said.

A few days later, Homesite notified him by letter that his policy would be canceled in about 30 days if he didn’t pay the higher rate, he said. Homesite officials did not respond to requests for comment.

While he has been unable to find another insurer to cover a vacant house, Tavares and his wife have decided they’re probably going to rent out the property because they may move back to the area. Insuring rental property will be easier.

“Rates are higher for a vacant house because losses tend to be higher,” said Vanessa Sink of the National Association of Insurance Commissioners. “Vandalism, arson and personal injury are always more likely in a vacant house.”

Tavares’ plan to rent his property makes sense, she said. “Purchase a fire policy and a comprehensive personal liability policy and rent it out. Even a below-market rental rate is going to be cheaper than property insurance on a vacant house.”

Tavares is doing the right thing by shopping around for insurance, said Glenn Allen, spokesman for Georgia Insurance Commissioner John Oxendine. His office contacted Tavares to get details of his situation and has provided him with names of several alternative insurance companies.

“I’m sure you could find a better price,” said Bob Hunter, director of insurance for the Consumer Federation of America, who noted that some insurers also specialize in this kind of coverage for vacant properties. “There’s no actuarial basis” for such a large spike in cost for the coverage, he said.

Hunter advised talking to the insurance commissioner in the state where the property is located. Contacts can be found at http://www.naic.org/state_web_map.htm.

The amount companies charge can vary greatly, said Mark Ginther, USAA assistant vice president for underwriting policy.

The company insures homes of many military members and retirees, but does not issue new policies for homes that are vacant at the time of application, Ginther said. But if homeowners have insurance coverage through USAA and must leave an unsold home vacant for an official reassignment move, USAA typically continues the insurance coverage until the next policy renewal, Ginther said.