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Vacant Home Insurance - No Coverage

Vacant Home Insurance

Under the standard ISO HO 3 homeowners policy, certain categories of personal property receive no coverage. These are:

  • articles separately described and specifically insured, regardless of the limit for which they are insured under any other insurance (to avoid double recovery);
  • animals, birds, or fish;
  • motor vehicles and accessories, equipment, or parts while they are in or on the motor vehicle;
  • aircraft (not including model or hobby aircraft not intended to carry people or cargo);
  • hovercraft, flare-craft, and air-cushion vehicles;
  • property of roomers, boarders, or other tenants, excepting property of roomers or boarders who are related to an insured;
  • property located in an apartment regularly rented or held for rental to others by an insured;
  • property rented to or held for rental to others off the residence premises;
  • business data, regardless of whether stored as paper, electronic, or computer records;
  • credit cards and electronic fund transfer cards, except as otherwise covered.
Perils Covered

Although it is something of a misnomer, the real property coverages of all the homeowners policies discussed (as opposed to personal property coverages) is so-called all-risk coverage. Under all-risk policies, coverage is defined by the policy's exclusions. The typical all-risk property insuring agreement provides that the insurer insures against risk of direct physical loss to property ..... This means the risk of loss to dwellings and separate structures.

Most homeowners insurers also sell named perils policies, in which covered property is only covered if loss results from a specifically listed peril. Such named perils policies are usually less expensive than the all-risk policies sold by the same insurer. This is true both of insurers that use standard ISO policy forms, as well as insurers that use proprietary policy forms. Vacant Home Insurance

As noted at the beginning, the term all-risk policy really is a misnomer. This is because the all-risk coverage of such policies only applies
to dwellings and separate structures. The property coverage applicable to personal property is named perils coverage in most cases.

There are really two functional differences between all-risk coverage and named perils coverage. First, as noted, under all-risk coverage, direct physical loss to covered property is covered unless the cause of loss is excluded.

Under named perils coverage, covered property is only covered if loss is caused by a peril that is specifically listed in the policy. The real difference here is that, in a practical sense, the list of covered perils under an all-risk policy is more inclusive than under a named perils policy.

Second, whether a policy is an all-risk or named perils policy affects the burden of proof in the event there is a coverage dispute after a loss that results in a lawsuit between the insured and the insurer. Under the laws of most states, the insured of an all-risk policy need show no more than that damage to or destruction of covered property occurred. The burden of proof then shifts to the insurer to prove that an exclusion precludes coverage.

In the world of property insurance, the terms peril, risk, and risk of loss refer to fortuitous, active, physical forces, such as fire, lightning, windstorm, theft, and vandalism (just to give a few examples). The concept of risk or peril as an active physical force is pretty self-apparent. The condition of fortuity requires a bit more explaining: fortuitous means occurring by chance or accidentally. For example, damage to property caused by wear and tear or failure to maintain is not loss that occurs by chance. Loss due to normal wear and tear is deterioration through use - a certainty, not a fortuity.

The fortuity requirement precludes coverage for intentional damage or destruction of property. This is why, for example, arson is not covered. There is another reason why intentional damage to or destruction of property is not covered. If such damage was covered, it would create an undesirable incentive for insureds to destroy property for the purposes of generating cash when they found themselves in financial difficulty. 

Covered Locations
Before discussing covered and noncovered perils, an explanation is needed regarding the geographic reach of coverage. As noted, the personal property
coverage of most homeowners policies is worldwide. Most homeowners policies also afford coverage to locations other than simply the residence premises in the policy's declarations. Vacant Home Insurance

This can be seen by reviewing the policy's definition of residence premises and insured location. In the standard ISO HO 3 (and the HO 2 named perils policy as well), residence premises means:

  • the single family dwelling that the named insured resides in; or, 
  • a 2-, 3-, or 4-family dwelling in which the named insured resides in one or more of the dwelling units; or,
  • that part of any other building where the named insured resides; and,
  • which is shown as the residence premises in the policy's declarations.

This definition is clear that residence premises is just one place - the place specified in the policy's declarations. The definition of insured location, however, makes sure that coverage extends to other locations as well. Insured location includes:

  • the residence premises;
  • other premises, other structures, and grounds used by the named insured as a residence and which is either:
    • shown in the policy's declarations or
    • which the named insured acquires during the policy period for use as a residence (in practical terms if, for example, you have a second or vacation home, that second or vacation home would be covered if it were listed in your policy's declarations);
  • any premises used by the named insured in connection with either of the two preceeding categories of insured location (e.g., a storage facility);
  • any part of the premises that are not owned by the named insured at which the named insured is temporarily residing;
  • vacant land, other than farmland, that a named insured owns or is renting;
  • land that is owned by or rented to the named insured on which the named insured is building a one, two, three, or four unit residence for him- or herself or for another insured;
  • individual or family cemetery plots or burial vaults of an insured; and,
  • any part of premises occasionally rented to an insured for other than business use (e.g., if you were to rent a vacation cabin or cottage for a few weeks, it would qualify as an insured location).
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