Most consider a vacant building to be a shell or structure with nothing inside. The word “vacant” makes people think “empty” or “not occupied”. To most insurance companies, vacant means something different. For building owners, understanding what the insurance policy considers vacant could help eliminate a costly surprise at claim time.
In most cases, the property insurance policy considers a building that is less than 31% occupied by the landlord’s customary business operations lessees or tenants to be vacant. Once occupancy dips below 31%, the policy allows the building owner a set number of days, usually 60, to remedy the vacancy. If occupancy has not increased by the 61st day, any covered claim that occurs while the property is vacant will result in a 15% reduction in coverage – only 85% of the total covered loss will be paid. Futhermore, if the claim is the result of certain specific losses, the payment will be zero. These specific losses include sprinkle leakage, water damage, vandalism, theft or attempted theft and building glass breakage.
To illustrate the insurance policy’s definition of vacant, consider the following examples:
*A newly completed strip center/office building with suites held for lease that is less than 31% occupied.
*A four story office building in which the first floor houses the landlord’s offices and the remaining three floors are being held for lease.
*A seasonal strip center that is less than 31% occupied for 5 months annually.
If your building is vacant by definition, call our service team today. It may be possible to amend your policy’s vacancy definition and save you precious dollars at claim time.