Unoccupied premises

Unoccupied properties present unique challenges for insurance coverage in South Africa. The risk factors associated with these properties differ significantly from those of occupied homes, necessitating adjustments in insurance policies. This article explores the primary risks and offers insights into how different insurers manage coverage for unoccupied properties.

Increased risks for unoccupied properties

When a property is left vacant, it becomes more susceptible to various risks. Here are the key concerns:

1. Heightened vulnerability to theft

Without the presence of occupants, properties become prime targets for criminals. The absence of deterrence increases the likelihood of break-ins, leading insurers to reconsider the extent of coverage they provide for unoccupied properties.

2. Malicious damage and vandalism

Vacant properties are more likely to experience vandalism or malicious damage. What might start as minor damage, such as graffiti or broken windows, can escalate into more severe issues, especially if valuable materials like copper pipes or electrical wiring are stolen, potentially causing water or electrical damage.

3. Undetected water damage

One of the most concerning risks is water damage that goes unnoticed in an unoccupied property. Leaks can develop and worsen over time, leading to issues, such as mould, structural decay, and severe damage that could have been prevented with early detection. In stacked dwelling units, undetected sewer backflow can cause even more extensive water damage.

4. Fire and storm-related perils

Unattended fires or storm damage can cause significant destruction. Without occupants to intervene, a fire may spread unchecked, and storm damage can lead to prolonged exposure to the elements, resulting in secondary damage that complicates repairs.

Policy adjustments by insurers for unoccupied properties

Insurers generally modify their policies to address the heightened risks associated with unoccupied properties. These adjustments often include:

• Increased excess: Most policies impose an additional excess, often around 20%, for claims made within the first 30 days of unoccupancy.
• Suspension of coverage: After 30 days of unoccupancy, coverage for specific risks like theft and malicious damage is typically suspended unless the insurer is notified in writing beforehand.

Protecting your property: Practical tips

Property owners can take proactive steps to minimise risks during periods of unoccupancy:

Home security

Actions:

• Lock all doors and windows
• Install security systems
• Use timers for lights
• Secure valuables

Benefits:

• Prevents unauthorised entry
• Deters burglars
• Gives the appearance of occupancy
• Protects valuables from theft

Appearance of occupancy

Actions:

• Hold mail and deliveries
• Ask a neighbour to check in

Benefits:

• Avoids signalling that the home is vacant
• Ensures the home is regularly monitored

Damage prevention

Actions:

• Turn off the water supply
• Unplug electronics
• Set the thermostat

Benefits:

• Prevents leaks and floods
• Protects electronics from surges
• Maintains safe home temperature

Insurance protection

Actions:

• Notify your insurance company
• Document your home
• Check your policy

Benefits:

• Ensures proper coverage
• Provides documentation for claims
• Understands policy limitations

Outdoor maintenance

Actions:

• Arrange for lawn care
• Secure outdoor items

Benefits:

• Keeps property well-maintained
• Prevents theft or damage to outdoor items

Access management

 Actions:

• Limit who knows you’re away
• Update emergency contacts

Benefits:

• Protects privacy
• Ensures help is available in emergencies

How major South African insurers handle unoccupied properties

Here’s a comparison of how different insurers in South Africa approach coverage for unoccupied properties:

Insurer A

Vacancy duration: 60 days

Coverage conditions:

• Theft and malicious damage coverage is withdrawn after 60 days.
• For shorter periods, policyholders share 20% of any claims.
• Partial vacancies are treated as separate units.

Policy responsibility:

• Must bear 20% of any theft or damage claims before standard excesses apply during short vacancies.

Insurer B

Vacancy duration: 30 days

Coverage conditions:

• Coverage for theft, attempted theft, and malicious damage is suspended after 30 days unless notified in writing.
• Even within 30 days, policyholders must bear 20% of related claims.

Policy responsibility:

• Must notify the insurer in writing to maintain coverage beyond 30 days.
• Must bear 20% of claims related to theft, or malicious damage within the first 30 days

Insurer C

Vacancy duration: 30 days

Coverage conditions:

• A higher excess is applied during the first 30 days.
• Coverage for malicious damage is suspended after 30 days unless extended in writing.

Policy responsibility:

• Must arrange a written extension to maintain coverage after 30 days, subject to additional terms and higher excesses.

What to keep in mind when your property is rented out

As a landlord you are not immune to implications of unoccupied property with your insurer as the blame does not shed across to your tenant; you are ultimately the property owner and ultimately the insured.  You must ensure that you have dealings with a reputable agent, or your lease agreement is firmly in place with the correct protection levels.  Here are some additional tips:

• Ensure communication with the tenant is in place so that you are aware of the times your property will be unoccupied.
• Make sure your lease agreement contains the appropriate clause that notes the conditions of unoccupancy and the implications thereof and where responsibility may shift to the tenant – clearly outline their responsibilities and duties when the property is unoccupied for extended periods
• Ensure you inspect the property, or your appointed agent does these checks for you and reports accordingly
• Encourage your tenant to have their personal belongings insured by way of their own domestic/ householder’s insurance policies; perhaps clearly recommend this in the rental agreement.
• Establish an emergency plan with your tenant should the worst situation arise. Most body corporate insurance policies will not cover alternative accommodation for a tenant and therefore as landlord contingency plans should be in place.

As a rule, it is best to prepare for any scenario upfront rather than retrace steps backwards only when the situation arises.  Providing your insurer with the opportunity to receive notification of impending unoccupancy allows the insurer to comment and perhaps provide you with their conditions on the risk of the insured property.  The main risk for the insurer is water damage and damage that is left unattended for extended periods.  Mitigation is key and divulgence is fundamental of honouring the insurance contract.