Whether we like it or not, insurance companies are not your “friend” in the rental business.  Yes, they provide a valuable product and provide coverage for you when the proverbial “SHTF”.  But, they also limit their potential exposure to paying out claims.

One method they use is to limit paying out claims when a home has been vacant for an extended period of time and a claim is filed.  If you are the unfortunate landlord or investor who has this occur, expect the insurance adjuster to do his best “Inspector Jacques Clouseau” to determine how long the home has been vacant.  They will research the mls for listing status changes, they will research utility records for usage or non usage, etc.  They WILL find out.

So, a best practice is to make sure you know precisely what your policy dictates on this issue.  And yes, dictates is the appropriate word for this since the policy is what sets the conditions for any claim review.  Now I know reading your insurance policy is more painful than reading the Terms & Conditions of your most recent iphone or Android system update and, like you, I don’t read them either.  Instead, what I suggest is that you email or call your trusted insurance agent who sold you the policy and ask them to send you a screenshot or a copy of the section of the policy, highlighted or marked with ink brackets, where the policy discusses this time constraint.  You aren’t asking for a huge favor from the agent since, after all, he or she made the commission from selling you the policy!

What do you then do with this new found nugget of information? 

Here’s what smart investors and landlords do:

1. Make an Excel spreadsheet or Evernote chart of all your properties to keep track of this time.
2. Whenever you have a vacancy occur, set a future task in your CRM or calendar system or whatever to alert you for WELL BEFORE this event is going to be triggered.  This early warning trigger will force you to re-evaluate your marketing of the property, including list price and terms, to determine if you should adjust any of your marketing criteria.
3. Call or email your insurance agent to discuss if there is additional coverage you can purchase to extend the vacancy time allowed.  While more expensive, it is still cheaper than having a claim outright denied due to the policy provision.  Many insurance companies offer a 3 or 6 month vacant dwelling policy that fills the gap during the vacancy.

Here’s to your continued Financial Freedom with Rental Properties!

Dan

P.S.  I have 1 slot remaining for a new Coaching Client in March, so if you’re looking to improve your operations, profitability, or need help knocking out those nagging issues you keep procrastinating from solving, get a jump on it before the year gets away from you.