So You Thought Your Insurance Was Going to Cover Vandalism?

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When I was in high school, the thought of breaking into a neighbor’s house and spray painting the walls, punching holes in the sheetrock, busting a water line, etc. never really entered my mind. Granted, I was just as mischievous as the next kid, but had enough sense about me to avoid conduct that could potentially land a felony on my criminal record.  Nowadays, it’s not uncommon to see vandalism of rental properties on par with what I just described.

Granted, most of the time, vandalism of real estate typically takes the form of stolen copper, appliances, HVAC, electrical wiring, etc. – basically anything that has value and can be scrapped for money. However, I’ve found that in about a quarter of the cases I’ve experienced, it’s been neighborhood kids just looking for trouble.  And I can tell you from experience that nothing is more frustrating than $5,000 worth of damages incurred as a result of a few neighborhood kids getting out their pubescent frustrations on your property.

Doesn’t Insurance Cover Vanalism?

Actually, I can think of something even more frustrating than that – finding out your insurance doesn’t cover the damages caused by the vandalism. In almost all cases, vandalism occurs when the house is vacant.  Most miscreants know better than to vandalize a property when there are tenants occupying the residence.  The question most investors don’t know to ask their insurance provider is how their insurance coverage changes once the house has been vacant for a certain period of time.

In most cases, landlord policies do not cover investors for certain perils (including vandalism) once the property has been vacant for over 30 days (sometimes 60 days).  As most investors know, it’s not uncommon for a property to sit unoccupied for 30 days or more … especially if a tenant recently moved out and the property needed to be prepped and put back on the market.  Even if you are able to get a new lease signed quickly, the chances of the new occupant moving into the property within that 30 day window are probably thin.  Most investors have no idea the potential exposure they may have when that policy goes outside the allowable vacancy window.

I can tell you from a recent experience that having a better handle on the vacancy window is now one of my top priorities. Not that we have a lot of problems with vandalism, but it only takes one bad experience to keep you honest.  Luckily for us, the vandalism occurred just inside the allowable vacancy period, but it was very close. Fortunately, my insurance company just cut a fairly sizeable check to cover the damages, but I was only a few days away from eating a very large loss.

How To Ensure You Are Covered

So what’s the solution to this potential gap in your insurance? I think the two best options are to shop for a landlord policy that has a larger vacancy period (perhaps 60 days) or put a vacancy policy in place as soon as you are outside your allowable window.  Yes, they are expensive, but hopefully you will not have to have the coverage for very long. Luckily, most all insurance companies will let you pay monthly or quarterly AND will refund any unused premium.

That said, every investment is different and every investor has a different risk threshold.  Maybe you feel good about an area and don’t sense a need to spend a few extra dollars on a vacancy policy. However, it does make sense to at least ask the questions and understand what your insurance policy does and does not cover.  The last thing an investor wants to hear from an insurance adjuster is a denial of coverage for something you thought you were protected against.

Photo: perthhdproductions

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About Author

Ken Corsini G+ is the founder of Georgia Residential Partners, LLC - a real estate investing firm based in Atlanta, Ga focused on creating turn-key investments for investors all over the country. He's been investing in real estate since 2005 with hundreds of real estate transactions.

14 Comments

  1. Chris Clothier

    Ken –

    Excellent and very timely article. Timely because it is a topic that so few invesetors actually know about. I have seen SO many investors get caught by surprise to find out they are not covered when minor vandalism occurs. I personally have delat with major vandalism several times and only once was the property still occupied…each other time I was covering the bill myself. A great learning lesson.

  2. Another point, we would never turn in a claim under $5000. Insurance companies say they won’t raise your policies if you have a claim, but they do. Someday, you may have lots of properties. Insurance companies look at any claims you’ve ever had on each and every one of your properties. You don’t want to use that precious insurance unless you really need to.

  3. In my area it is not hard to get insurance on a vacant property, but the house must be secured, sometimes alarmed as well.

    I have made a few claims I thought would be under $5000 and received much larger amounts one was for vandalism, the property was vacant for two days. The tenant left some belongings that someone thought were worth carting off. I know it was not the tenant as I had not changed the locks, but the looters used a brick on a rear window, that by the way did not have a working lock.

    All of my buildings were bought as rehabs, so none contain any copper.

    When they go vacant I secure them well and put out the no copper on these premises sign. :)

  4. I had never even thought about this – I always assumed landlord policies covered vandalism indefinitely. Definitely an eye-opener for anyone looking to invest in rental properties. It’s a shame insurers don’t explicitly state their vacancy-period policies outright without burying it in the fine-print. I can only assume most landlords find out about this the hard way.

    • Alex – unfortunately I think you are right – many landlords find out about this the hard way. Hopefully this will help a few investors take pause, and consider what coverages they actually have under their policies.

  5. Good post and replies. Because of the frequency of theft claims (especially on vacant locations), the carriers have either excluded the coverage altogether, or increased rates to make purchasing it cost-prohibitive. Technically, “vandalism” and “theft” are two different perils, FYI, as well. Vandalism is covered under a “Basic” form, but “Theft” is not. As to which Ken so well alluded, understanding what you have BEFORE you need it, is paramount. Many of our clients have foregone the Theft coverage to save the premium and sell-insure the peril. Depending on your model, may be worth investigating.

  6. I have these conversations daily. Another point I would like to mention is theft. Some investors assume when someone breaks down the door, tears down the walls, and steals the pipes that it would all fall under Vandalism and Malicious Mischief coverage. Depending on your policy, the door and drywall may be covered under vandalism, but the pipes are not. They have been stolen which falls under theft coverage. Most (we have a few that don’t) companies do not cover theft on a vacant home. They will pay to fix the door and drywall but they wont pay to replace the pipes.

    Some vacant policies will exclude vandalism also. It has to be added for an additional premium or it may not be available at all. A good insurance agent is just as important as a good real estate attorney. Your home and auto insurance agent may not have the experience, products, or coverage you need.

    Lastly, if you have a homeowners policy or a landlord policy and your property is vacant, you may not have ANY coverage at all. A 30 day vacancy clause it pretty standard on those policies. Also a homeowners policy (not a Landlord policy) will not cover you if you have tenants. Be aware. Most people hate to pay insurance premiums only to find out the company is not going to pay the claim because they have the wrong type of policy.

    Again, Great topic. One of my favorites!

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