Question about home insurance for the house on sale (for sale, foreclosure)

[sandia]

Hi,

I've put my house on the market for a while and I moved out of state, my home insurance expires recently and the insurer refuses to renew the policy since the house is vacant.

I checked some national insurance companies and my mortgage company, they either refuse to insure or charge a huge premium.

I see so many vacant houses on the market right now, I am wondering how such situation is handled in general?

[Bob from down south]

I've seen quite a few houses shown that are empty except for something like an old couch and a few old clothes hanging in the closet...and based on that they tell the insurance company it's "occupied." That works to keep the policy alive, but I'd have to wonder what would happen if there were a major claim.

Once the insurers know it's empty, they back away. Can't blame 'em, look at all the horror stories of vacant houses being stripped of their plumbing and wiring and otherwise heavily damaged.

[Charles]

Originally Posted by Bob from down south

That works to keep the policy alive, but I'd have to wonder what would happen if there were a major claim.

Excellent questions from the original poster and very important response. I may be in the same boat and we will probably keep our belongings in the home.

I think I have more research to do...

[COflower]

Huh?

Wow, that's really lame that your insurance company wouldn't cover it if it's not occupied.

I would talk to many insurance companies. I would also ask the higher ups within your mortgage company. Sit down face to face if possible. I mean, they wouldn't want to go through the whole foreclosure situation if something happens to your house and you are unable to pay...if that makes sense.

I would assume that the Colorado Department of Law | Attorney General John W. Suthers 's office have the best answers for you. I can't imagine your home would be uninsurable if you or a renter is not living in it. It would have to have some kind of coverage, especially if you have a mortgage.

That just baffles my mind!

EDIT: if you find out what your options are, please post to this thread. My landlord plans on selling next year (sad me) and I am sure he may need to know as others facing the same situation.

[Bob from down south]

Originally Posted by COflower

Huh?

Wow, that's really lame that your insurance company wouldn't cover it if it's not occupied.

I would talk to many insurance companies. I would also ask the higher ups within your mortgage company. Sit down face to face if possible. I mean, they wouldn't want to go through the whole foreclosure situation if something happens to your house and you are unable to pay...if that makes sense.

I would assume that the Colorado Department of Law | Attorney General John W. Suthers 's office have the best answers for you. I can't imagine your home would be uninsurable if you or a renter is not living in it. It would have to have some kind of coverage, especially if you have a mortgage.

That just baffles my mind!

EDIT: if you find out what your options are, please post to this thread. My landlord plans on selling next year (sad me) and I am sure he may need to know as others facing the same situation.

I did a fair amount of research on this last October, as we nearly bought a house in COS last fall with the intent of letting it sit vacant until we arrived in July (and boy am I glad I didn't!!). I checked with numerous insurers...USAA, State Farm, Farmers...they all sang the same tune. And if you read the fine print in a homeowners policy, you'll find there's contract language regarding keeping the house occupied as a condition of the insurance. So there's nothing the AG would have to say about that, other than you have a duty to uphold your end of the contract you signed.

As to the mortgage company...nearly all mortgage contracts require that you keep the house insured...and in fact you're in default if you don't. They have the option of buying some really expensive insurance that'll cover the house, and then holding you responsible by not clearing the lien until you pay it and probably some other punitive slapdown fees. And again, it's in the contract that you signed... Sitting down with your lender(s) and attempting to apply leverage to them would likely be be a really counterproductive approach to the problem.

[Vision67]

I've heard about this issue, but with approx 2 million houses now vacant in the USA, I find it hard to believe they are all uninsured.

[Charles]

Originally Posted by Vision67

I've heard about this issue, but with approx 2 million houses now vacant in the USA, I find it hard to believe they are all uninsured.

They might not be uninsured but an insurance company could refuse to honor a claim if the policy was violated.

[Bob from down south]

Originally Posted by Vision67

I've heard about this issue, but with approx 2 million houses now vacant in the USA, I find it hard to believe they are all uninsured.

There's a difference between having a policy and being insured. Most probably still have policies in effect, but the effectivity of the insurance is in question. If the copper pipes are ripped out and the insurance company sees photos that show an empty house except for a card table and an Army cot, or evidence of vagrant occupation like drug paraphernalia and graffiti, it's far from certain that they would pay a claim.

There is insurance available, but as a previous poster noted, it's quite expensive, as it should be, since vandalism rates for vacant properties are massively higher than for occupied ones. It's a matter of fairly pricing the risk.

Many of those 2 million empty houses are in default/foreclosure or are lender-owned (REO) properties. A guy that's not making his mortgage payments is leaving the insurance escrow to seed as well. I do wonder how many of the REO properties are insured when they go back to the bank.

[Charles]

I called my insurance company about this and they told me that in the case that a policy holder doesn't occupy the home, the policy can be converted (not sure if that is the correct wording) into a seasonal residence. Not sure how that affects the premiums.

[COflower]

Originally Posted by Charles

I called my insurance company about this and they told me that in the case that a policy holder doesn't occupy the home, the policy can be converted (not sure if that is the correct wording) into a seasonal residence. Not sure how that affects the premiums.

Well that's good, I mean you HAVE to have insurance of some kind and I can't imagine that mortgage companies would be that stupid (not what I want to say...lotta cuss words) as not everyone has the option of someone living in the house when they are getting it ready to sell.

My landlord/friend will be a month or two without me living here while he preps the house for sale next year. For him to not have insurance would make me uneasy. He has a VA loan so it might be mandatory but it just seems very wrong not to have some kind of insurance if you are simply selling a house.