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Southern Colorado Insurance Center Blog

All You Ever Wanted to Know About Insurance

Unoccupied vs. Vacant: Do You Have the Right Coverage for Your Building?

The marketplace is always fluctuating and when it is in a slump, property managers and property owners can find themselves with an insurance dilemma on their hands when tenants move out. “Is my building vacant, or is it unoccupied? What does that mean if I have a claim?”

Is there a difference? When it comes to insurance, yes, there is a difference and it is important to know what it is.

Unoccupied Doesn’t Mean Empty

Southern Colorado Insurance Company defines unoccupied buildings or spaces as owned, rented or leased units that contain contents but no people occupy them on a regular basis. This can refer to a second or vacation home or a secondary office space.

If a building becomes unoccupied and stays that way for more than 90 days, the property insurance coverage in place on the Colorado property may be reduced. The amount of coverage may be affected depending on the policy term and conditions.

The Building Can Be Vacant Even With Tenants

Vacancy is defined in one or more of following ways:

  • A rented or leased building or unit is considered vacant when it does not contain enough personal property to conduct customary business operations.
  • An owned building is considered vacant when less than 31% of the total gross building square footage is not rented or leased to a tenant and used for customary business operations or used by the building owner to conduct customary business operations.

Even if your building has tenants in it, if there aren’t enough of them and they aren’t there on a regular basis, the building can be considered vacant. The vacancy provision in the property will usually kick in after 60 days of vacancy, resulting in reduced coverages, limits, or both.

Your Insurance Coverages Will Change

If your building doesn’t have enough tenants or customary operations being performed inside, your Colorado property insurance policy coverages may change or even cease. Most policies include a vacancy provision stating that after a certain period of time (usually 60-90 days) unoccupied or vacant, the carrier will no longer pay claims for the following:

  • Vandalism
  • Sprinkler leakage, unless you have protected the system against freezing
  • Building glass breakage
  • Water damage
  • Theft
  • Attempted theft

If you have questions or concerns about your coverage, Southern Colorado Insurance Center can help!

It Does Matter

While it might seem unfair that the coverage you pay for can be reduced due to vacancy or lack of occupants, it really does matter. An unoccupied or vacant building has a much different life cycle than an occupied one:

  • Less occupancy results in less traffic in and out of an insured building.
  • Less traffic results in less maintenance to the building.
  • Less maintenance makes the building more susceptible to damage.
  • More damage creates an attractive nuisance that invites vandals, transients, and other unwelcome guests.

All of these increase the likelihood of a property insurance claim on the unoccupied or vacant property. Since insurance carriers cannot increase premiums midterm, the coverages are reduced to reflect the higher risk.

The good news is there are policies available for unoccupied or vacant buildings. These are especially helpful if the property will be at less than capacity for a long period of time or during an ownership transition such as a sale or foreclosure. Short term policies are also available. Our experienced agents at Southern Colorado Insurance Center are happy to help you find the best policy for you and your Colorado business.


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