Vacant home insurance 411 please

[Rod Hagen]

Hi all.  Someone close to me now has a house in LA.  He can not move into it.  He needs to insure it while he cleans it out and remodels (eventually, there will be construction inside and out) it and either rents it or sells it. 

While necessary, it appears to be very difficult to get Vacant Home Insurance.  All the major companies like Progressive etc. are saying NO.  Especially when they hear it's in California.  And the smaller, local, agents they refer to all seem to have shitty reviews.

So, rich folks :-)  how would you go about insuring a home/house (not apartment or condo) for the months that it is vacant?

[+ nycman]

27 minutes ago, Rod Hagen said:

Hi all.  Someone close to me now has a house in LA.  He can not move into it.  He needs to insure it while he cleans it out and remodels (eventually, there will be construction inside and out) it and either rents it or sells it. 

While necessary, it appears to be very difficult to get Vacant Home Insurance.  All the major companies like Progressive etc. are saying NO.  Especially when they hear it's in California.  And the smaller, local, agents they refer to all seem to have shitty reviews.

So, rich folks 🙂 how would you go about insuring a home/house (not apartment or condo) for the months that it is vacant?

I’ve found that Lloyd’s of London will insure just about anything…..for a price. 

Don’t ask me how I know. But I do. And yes, the ass fucking that I took was painful.

Best of luck!

[Kevin Slater]

Can he just claim it's his vacation home?  Or a rental?  I've never had an insurance company drill down on who occupies the insured unit.

Kevin Slater

[+ stevenkesslar]

5 hours ago, Rod Hagen said:

So, rich folks 🙂 how would you go about insuring a home/house (not apartment or condo) for the months that it is vacant?

I think Kevin is right.  I was just about to hit post when I saw he posted.  So this is my verbose and more detailed version of what he suggested.

The question confuses me.  I've owned a bunch of homes for decades, during which time State Farm insured them all.  During that time some of them were vacant for more than a month.  Either because I was selling them, or remodeling.  State Farm never made that an issue.  Perhaps because in most cases, like when I was selling, I never told them it was going to be vacant.  But in a few cases I know I told them.  Because I acquired the homes to flip them, as perhaps in your friend's case, and State Farm knew that.  So if I were in a situation like that the first thing I would do is work with whatever company insures what I have, already.  It's not like selling a home that stays vacant for months, or remodeling a vacant home to rent, is a rare thing.  

I Googled to see what State Farm said, and this is what I came up with:

Quote

Be aware that if your home is empty for a month or more, your homeowners insurance may not cover losses that occur while it's vacant. Talk with your State Farm® agent to discuss your options.

That may be part of the answer.  That's on an owners policy.  But it makes sense that whether the policy is owner or rental it really becomes an issue when you make a claim.  I've only made a few relatively small insurance claims on any home in 25 years.  So I assume State Farm knows that, and likes me for that reason.  I've never made a claim on a vacant home.  So I wonder if there is some element of "Don't ask, don't tell" in my history.  Like we won't make it an issue, unless you make a claim after the home has been vacant for months.

When I was actively flipping homes, I vaguely recall having a discussion about this with the State Farm broker in Sacramento, where I was flipping.  It was right in the middle of subprime.  So I recall him saying  that losses were mounting, and it was  a sensitive issue.  And while I was flipping one home that was vacant I actively watched a house across the street gradually being dissected by thieves.  Like stripping copper out of walls and making off with HVAC units.  My vacant home that was being remodeled was broken into twice.  One morning I showed up at like 7 am before an inspection and was wondering, "Why is someone mowing my lawn at 7 am with a bicycle?"  I was half awake.  It was some thief on a bike on the lawn who had cleverly strapped a vacuum cleaner and anything else with wheels on to their bike so they could haul their booty away in bags.  Part of my point is nothing of real value was stolen.  It was irritating enough that I decided that, even though flipping was profitable, it was easier, and more fun, to just get paid to go to Europe or Mexico with the clients we shared, and what not.  😀  I hope your friend realizes that break ins are a possibility.  But very unlikely something that would result in a big loss or an insurance claim.  Hopefully they know that whoever does the remodeling should not leave boxes of expensive stuff in the house overnight.  Just assume someone can and will break in.

For whatever reason, I'm guessing that I have been a good customer, State Farm just never made it an issue.  The home I just sold, which was vacant for a few months, was insured as a rental.  Again, I didn't call them to tell them I was selling it, and it would be vacant for a while.  I'm not even sure how I insured the vacant homes I flipped.  I'm guessing as rentals.  Since I had an owner-occupied policy with State Farm at the time.  I may also vaguely recall that they might have said they could insure it as a rental, knowing that of course rentals are sometimes vacant.  But at some point if it stayed vacant forever that could be an issue.  But, in reality, it never was.

Vacant & Unoccupied Home Insurance

When I Googled vacant home insurance I came up with that with Farmers, too.  Again, I'm a little confused because, by definition, almost every rental home I've bought was vacant when I bought it.  (in one case I inherited the owners who put it up as a short sale in 2008, who are still my tenants in that home.)  You didn't say your friend just bought it.  You said he "has" it.  And he may rent or sell it.  Regardless of the specifics, I guess what I would do based on what you posted is call State Farm or Farmers and say I have this house I want to rent.  But I plan to fix it up first so I can charge more rent.  Again, this is something very normal that happens every day.  I'm guessing builders or developers who flip homes 24/7 may have some other arrangements with their insurers involving a Vacant Homes Policy.  But if your friend is a Mom and Pop landlord, or just someone who for some reason came to own a home, at least based on my experience State Farm should be willing to insure it as a rental that the owner is doing some work on to rent it.

Edited September 1, 2023 by stevenkesslar

[Rod Hagen]

16 hours ago, Kevin Slater said:

Can he just claim it's his vacation home?  Or a rental?  I've never had an insurance company drill down on who occupies the insured unit.

Kevin Slater

Well, there's that.    "Sure I'm here on the weekends".  Definitely an option.  Thanks.

 

[Rod Hagen]

16 hours ago, stevenkesslar said:

I think Kevin is right.  I was just about to hit post when I saw he posted.  So this is my verbose and more detailed version of what he suggested.

The question confuses me.  I've owned a bunch of homes for decades, during which time State Farm insured them all.  During that time some of them were vacant for more than a month.  Either because I was selling them, or remodeling.  State Farm never made that an issue.  Perhaps because in most cases, like when I was selling, I never told them it was going to be vacant.  But in a few cases I know I told them.  Because I acquired the homes to flip them, as perhaps in your friend's case, and State Farm knew that.  So if I were in a situation like that the first thing I would do is work with whatever company insures what I have, already.  It's not like selling a home that stays vacant for months, or remodeling a vacant home to rent, is a rare thing.  

I Googled to see what State Farm said, and this is what I came up with:

That may be part of the answer.  That's on an owners policy.  But it makes sense that whether the policy is owner or rental it really becomes an issue when you make a claim.  I've only made a few relatively small insurance claims on any home in 25 years.  So I assume State Farm knows that, and likes me for that reason.  I've never made a claim on a vacant home.  So I wonder if there is some element of "Don't ask, don't tell" in my history.  Like we won't make it an issue, unless you make a claim after the home has been vacant for months.

When I was actively flipping homes, I vaguely recall having a discussion about this with the State Farm broker in Sacramento, where I was flipping.  It was right in the middle of subprime.  So I recall him saying  that losses were mounting, and it was  a sensitive issue.  And while I was flipping one home that was vacant I actively watched a house across the street gradually being dissected by thieves.  Like stripping copper out of walls and making off with HVAC units.  My vacant home that was being remodeled was broken into twice.  One morning I showed up at like 7 am before an inspection and was wondering, "Why is someone mowing my lawn at 7 am with a bicycle?"  I was half awake.  It was some thief on a bike on the lawn who had cleverly strapped a vacuum cleaner and anything else with wheels on to their bike so they could haul their booty away in bags.  Part of my point is nothing of real value was stolen.  It was irritating enough that I decided that, even though flipping was profitable, it was easier, and more fun, to just get paid to go to Europe or Mexico with the clients we shared, and what not.  😀  I hope your friend realizes that break ins are a possibility.  But very unlikely something that would result in a big loss or an insurance claim.  Hopefully they know that whoever does the remodeling should not leave boxes of expensive stuff in the house overnight.  Just assume someone can and will break in.

For whatever reason, I'm guessing that I have been a good customer, State Farm just never made it an issue.  The home I just sold, which was vacant for a few months, was insured as a rental.  Again, I didn't call them to tell them I was selling it, and it would be vacant for a while.  I'm not even sure how I insured the vacant homes I flipped.  I'm guessing as rentals.  Since I had an owner-occupied policy with State Farm at the time.  I may also vaguely recall that they might have said they could insure it as a rental, knowing that of course rentals are sometimes vacant.  But at some point if it stayed vacant forever that could be an issue.  But, in reality, it never was.

Vacant & Unoccupied Home Insurance

When I Googled vacant home insurance I came up with that with Farmers, too.  Again, I'm a little confused because, by definition, almost every rental home I've bought was vacant when I bought it.  (in one case I inherited the owners who put it up as a short sale in 2008, who are still my tenants in that home.)  You didn't say your friend just bought it.  You said he "has" it.  And he may rent or sell it.  Regardless of the specifics, I guess what I would do based on what you posted is call State Farm or Farmers and say I have this house I want to rent.  But I plan to fix it up first so I can charge more rent.  Again, this is something very normal that happens every day.  I'm guessing builders or developers who flip homes 24/7 may have some other arrangements with their insurers involving a Vacant Homes Policy.  But if your friend is a Mom and Pop landlord, or just someone who for some reason came to own a home, at least based on my experience State Farm should be willing to insure it as a rental that the owner is doing some work on to rent it.

Thank you Steven.  You're right, this is not a Flip House (it was an inheritance).  It could be empty for a half year or more, certainly more than a month or two.  I should have explained that.

Also, I should have mentioned that State Farm (right again SK!) was the first company recommended in this situation.  However, there is something going on in the California HomeOwner's Insurance market right now, which I don't understand but resulted in State Farm saying, "we are not in the vacant home insurance business in California right now, good luck."

 

Another Major Home Insurer To Limit Business in California

SFSTANDARD.COM

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This won’t make it easier to get home insurance in California.

One other difficulty is that this house is located in what's considered a wildfire zone. So now I'm reading all this boring stuff on his behalf about WRAP and FairPlan

 

WRAP: Wildfire Risk Reduction and Asset Protection Initiative - United Policyholders

UPHELP.ORG

---

On this landing page you will find Standards, Studies, Reports, Legislative Efforts and Blogs related to UP's Wildfire Risk Reduction and Asset Protection Initiative...

 

Home page - The California FAIR Plan

WWW.CFPNET.COM

 

I think you and Kevin hit on the solution, I was just wondering if there were some other options. 

I've always been impressed with you, SK, Kevin, and others on the subject of Real Estate.  There's nearly nothing I don't enjoy discussing, even things people consider very boring.  But man, fucking Real Estate, there is nothing NOTHING I've encountered in the larger world more mind-numbingly dull to me than Real Estate.  Kudos.  And THANKS!

 

Edited September 2, 2023 by Rod Hagen

[+ nycman]

8 minutes ago, Rod Hagen said:

However, there is something going on in the California HomeOwner's Insurance market right now, unrelated to my friend's property, which I don't understand but resulted in State Farm saying, "we are not in the vacant home insurance business in California right now, good luck."

It’s a combination of the high rates of crime and homelessness in California right now.
It makes insuring a vacant home extremely risky, and the one thing insurance companies hate….is risk. 
I think of insurance companies like I think of Vegas casinos, they only take the bets they know they can win in the long run. 

[Rudynate]

If possible he should try to work with an agent he has a relationship with.  Since I have changed practice areas maintining prior acts coverage was going to be tricky. I was thinking I was going to have to change agents, but just in case, I called my agent.  It turned out to be as tricky as I was afraid it would be, but she got it done.  In fact, I probably ought to send her a present. 

[+ stevenkesslar]

10 hours ago, Rod Hagen said:

But man, fucking Real Estate, there is nothing NOTHING I've encountered in the larger world more mind-numbingly dull to me than Real Estate.  Kudos.  And THANKS!

I had not even thought of wildfires.  The part of what I said about Sacramento and subprime that is relevant was that State Farm was looking to trim risk and exposure.  I'm going to assume whoever your friend's current insurer is has said no.  As @Rudynate said, ideally work with an agent he already knows.  In my case, my history of lots of insurance premiums and only a few small claims with State Farm had to help.  If whoever he is currently insured by says no - assuming he owns a home and car - saying I will go elsewhere with all my business, and doing so, might be an option.

So I would go back to the idea of insuring it as a rental.  "I inherited this home.  I plan to rent.  I think it will take a few months to fix it up.  It may take longer."  That's all they need to know. To be clear, it's not, "I'm there on weekends."  I know for a fact insurance companies know that when people like me buy rentals, sometimes we fix them up before we rent them.  Then it gets into, how long?  I'll repeat that I vaguely recall my SF agent may have said something like if the house is still vacant in six months this could be a problem.

If I were in this situations and State Farm did that to me, I would be pissed.  And I'd let them know it.  I had a fun time a few years ago crucifying a mortgage servicer with the California Dept. of Financial Innovation when they fucked up on a prepayment I made and refused to fix the problem after several months.  As soon as the CDFI got involved, the mortgage servicer gave me the respect I deserved.  Here's a website I found on a quick Google search that is NOT the California Dept. of Insurance but has basic info about them.   In this case, based on a brief scan, it's probably not worth the bother.  They'll just say it's our policy not to cover (x).  But getting a letter from a government regulatory agency could help change their minds. 

I've read that most of the state of Florida is becoming increasingly uninsurable because of all the disasters.  Maybe homes in wildfire-prone areas of California are the same.  I was not aware that State Farm said in May that they won't write new policies in California until you posted that article.  There's no getting around that.  I guess the worst case scenario is your friend is going to have to settle for crappy insurance that is expensive.  And then factor that cost into whatever his budget is. 

Also a tangent, but one of my brothers just inherited a home.  Which he was melting down about having to sell with a few other friends of the deceased.  I found a local realtor in his area that clearly bought homes to flip, rehab, or tear down.  Bottom line is the house was sold quickly, without listing, for a discounted commission, and for maybe 5-10 % less than they might have gotten had they listed it for months and done lots of repairs.  My brother and his partners were delighted.  Point is that, because he inherited it,  he basically viewed it as free money.  He felt the additional money he might have made otherwise wasn't worth the likely major pain in the ass of listing and repairs and possible sale fails.  In this case, your friend could decide it sucks I have to pay more for crappy insurance.  If that is the best option.  But it's a house I inherited.  There are worse things that could happen.

I'll reinforce another thing I said, which I thought maybe was TMI.  I would advise him to assume the house will be broken into, and he will not even think of making a claim.  I think when I wanted State Farm to insure a home I was flipping in a poor neighborhood during the massive subprime nightmare I might have said that to my agent.  In reality, even if I wanted to make a claim on the two break ins I had, the loss was small enough that it would have been stupid to do so.  But he does need insurance in case the house burns down.  Or they screw up a pipe and it floods, which has happened twice to people I know doing remodels.

This really gets into detail.  But it might actually be better to go with FAIR Plan (which sounds like it only covers fire) or crappy insurance with somewhat broader coverage that he is 100 % sure will actually cover a few extremely unlikely scenarios.  As opposed to risking that State Farm or some other big name insurer will deny a claim after a pipe bursts because the home was vacant and that was not properly disclosed.  While we are at it, this website says earthquakes are a higher risk in LA County than wildfires. That's a whole different topic.  I decided like 20 years ago I wasn't going to spend what by now would have been a small fortune to cover the risk of earthquake.  So far it has worked out well for me.  So part of your friend's decision can be what risks he's willing to take.  Like I want protection if the house burns down, but not if a pipe floods it or an earthquake levels it.

I'll end by going off topic for one paragraph, to address your allegation I quoted above.  😉   You're wrong.  Since you have made it personal, I hope I can spend one paragraph responding.  My nephew and I regularly exchange emails - like maybe a dozen this week - loaded with graphs about RSI divergences or trend lines or what Hussman thinks about the Fed.  Mike Green, and his theories about the dangers of passive investing, is the victim of our current mind-numbing debate.  We've already agreed when I visit Chicago later this month we will have to leave the room when we talk about this stuff.  His wife, Mom, and Dad simply won't tolerate it.  His problem is he scored 99 % on the ACT test for scientific reasoning.  I think that's actually worse than being Gay.  Or being a landlord.  That said, many Gay men might actually enjoy YouTube debates about being passive versus active.   😉

Edited September 3, 2023 by stevenkesslar

[handiacefailure]

When I moved into my current condo my old condo was on the market fort a while and State Farm insured it with no issues.  They just insured the structure with no contents.

[+ The Big Guy]

You can most likely find someone to insure it at some price but be sure to read the fine print.   Many times they will not cover theft or vandalism on vacant homes.   

[+ stevenkesslar]

@Rod Hagen  in case you did not see this article today.  Not really good news .... for anyone.

California tries for a different path than Florida on insurance

Quote

State Farm, Allstate and Farmers announced pullbacks this spring, citing the risk of wildfire as well as rising costs related to inflation and global disasters. The state’s last-resort insurer has also been warning it could go bankrupt because of all the risk it has been taking on.

Quote

Dave Jones, a former California insurance commissioner who now directs the University of California, Berkeley law school’s Climate Risk Initiative [said] “I do believe we’re steadily marching towards an uninsurable future, not only in California, but throughout the United States.”

 

Edited September 10, 2023 by stevenkesslar

[RealAvalon]

On 9/2/2023 at 7:38 AM, Rod Hagen said:

Well, there's that.    "Sure I'm here on the weekends".  Definitely an option.  Thanks.

 

In my experience, a typical rider of the policy has been that the home is visited/inspected at least every 30 days. Document when the home has been visited.  If there is any problem with vacant insurance issues, it's been around the issue of "monitoring" the house, and having been around to see what's up with it while it's vacant. 

[MscleLovr]

I had a similar situation, but not in California, of inheriting a large house that I didn’t plan to visit much.

My solution was to find a reputable local law firm with a probate and estates practice. They were used to dealing with empty properties when clients died. They not only arranged the insurance for me but also had local contractors to visit the property regularly and do any necessary landscaping, cleaning and repairs.