Vacant Properties May be Putting Your Coverage at Risk

While U.S. office vacancy rates dropped dramatically last year to the lowest level since 2009, many businesses still have an inventory of empty buildings. And having a vacant property can have a significant impact on your commercial property coverage.

In the insurance industry, buildings under construction or being renovated are not considered vacant. However, if commercial buildings have not rented at least 31% of their total square footage to a lessee or sublessee for “customary operations” or if the building must be used by the property owner to conduct customary operations, the building is considered vacant and coverage can be limited.

Many policyholders are unaware that their coverage may be reduced by vacancy. In fact, if your property is vacant for 60 days or longer prior to a loss, the following coverages may be limited or may not apply:

  • Vandalism
  • Glass breakage
  • Water damage, including sprinkler leakage, unless the building owner has protected the property against freezing
  • Theft or attempted theft

In addition, other covered losses would be reduced by 15% in the event of a loss on a vacant building. Not all carriers include a vacancy clause in their policy, although some offer a buyback of the vacancy clause through an endorsement.

If you lose an anchor tenant or your property is in danger of becoming vacant, it’s important to contact your insurance professional immediately so he or she can help you protect your property.