Between Tenants: Insurance Questions for a Vacant Rental Property

Every landlord eventually has a property sit empty. A tenant moves out, the carpet needs replacing, the market is slow, or you decide to do a bigger renovation before listing again. A few weeks of vacancy is part of owning rental property. If you are new to renting out a house, start with my overview of landlord vs. homeowners insurance.

What surprises many owners is that an empty house can be treated differently by their insurance policy. Vacant properties carry different risks — and some policies change how they respond after a property has been empty for a while.

Why vacancy matters to insurance companies

An empty house is more likely to have problems go unnoticed. A slow leak can run for weeks. A furnace can quit during a cold snap and freeze the pipes. Vandals and thieves may target homes that look unoccupied, and copper pipes or appliances can disappear. Without someone living there, small issues have time to become big ones.

Check your policy’s vacancy wording

Many landlord and dwelling policies include a vacancy provision. A common version limits or removes coverage for certain causes of loss — such as vandalism, glass breakage, theft, or water damage — once a property has been vacant for more than a set number of consecutive days, often 60. The exact wording, time frame, and affected coverages vary by policy.

If you expect a longer vacancy — for a major renovation, a slow rental market, or while deciding whether to sell — talk to your agent before you hit the deadline. Some situations may call for a vacancy endorsement or a different type of policy.

Protecting the property through Kansas City winters

Frozen pipes are one of the most common and expensive problems in vacant homes in our area. Some policies also require you to take reasonable steps to protect the property from freezing — such as maintaining heat or shutting off and draining the water supply — for freeze-related damage to be covered.

• Keep the heat on at a safe minimum temperature through the winter.
• Consider shutting off the main water valve and draining the lines if the property will sit empty.
• Use smart thermostats or water leak sensors that alert you to problems.
• Have someone check the property regularly, inside and out.
• Keep gutters clear and the exterior in good repair before winter storms.

Renovations and contractors

Many owners use the time between tenants to update a rental. If you are hiring contractors, ask for proof that they carry their own liability insurance and, if they have employees, workers’ compensation. Keep certificates of insurance on file. If a contractor causes damage or someone gets hurt on the job, you do not want your landlord policy to be the only one in the picture.

Major renovations can also change the value of the property. If you are adding square footage, finishing a basement, or upgrading the kitchen, review your dwelling limit so it reflects the updated rebuild cost.

Liability does not take time off

Even an empty rental can create liability exposure. Prospective tenants walk through during showings. Contractors come and go. Neighborhood kids may wander onto the property. Keep walkways clear, steps and railings secure, and the yard maintained. If snow and ice are a factor, have a plan for clearing them. And once a new tenant signs, require them to carry their own renters insurance for their belongings and personal liability.

An empty rental still needs a landlord. It just does not have anyone calling you when something goes wrong.

Lost rent and what it usually does not cover

Many landlord policies include fair rental value or loss of rents coverage, which can help replace lost rental income if a covered loss makes the property unrentable. It is generally not designed to pay for vacancy itself — such as a slow market or the time it takes to find a new tenant.

A between-tenants checklist

• Note the move-out date and track how long the property has been empty.
• Read your policy’s vacancy and unoccupancy provisions, or ask your agent to explain them.
• Call your agent if the vacancy may run longer than your policy allows.
• Winterize or maintain heat, and schedule regular property checks.
• Collect certificates of insurance from any contractors.
• Update your dwelling limit after significant improvements.
• Require renters insurance in the next lease and collect proof before move-in.

This is general information, not a description of any specific policy, and it does not guarantee coverage. Vacancy provisions and requirements vary by company and policy form. If you own rental property in Independence or anywhere in the Kansas City area and a unit is about to sit empty, text or call and we can review your landlord coverage before there is a problem. You can find more owner and renter topics on the Shield Squad blog.