Does a Vacancy Permit mean that you need permission to give up occupancy of your home? Well, not exactly.
It is a term used by insurance companies for limited, though costly, coverage when a home is left vacant. Insurance companies define a vacant home as one in which the owners have moved out and have no plans of returning. Real estate professionals come across this often.
This can happen when you have purchased and moved into another home and your existing home is for sale but sits vacant. An estate sale, or "power of sale" is another example where the home can be vacant for a time.
According to the Insurance Bureau of Canada, insurance coverage on dwelling and contents ceases automatically when the premises have been vacant for more than 30 consecutive days without the insurer’s prior approval. After that, insurance coverage will automatically terminate, unless you talk to your provider within the 30-day window and explain your situation. You don’t want to get caught short.
Your insurer will suggest vacancy insurance, known as a Vacancy Permit. What’s more, vacancy insurance typically will not cover damage or loss caused by leaking water, broken water pipes, freezing and glass breakage. As well, coverage for vandalism lapses immediately once the home is vacant--no 30 day window here.
Other Important Considerations
- Whether the insurer grants a vacancy permit is contingent on an individual’s loss history, location and length of vacancy
- Typically a vacancy permit can be obtained for up to 3 months, yet you receive no rebate of the cost should the home sell sooner
- Due to the risks associated with a vacant home, the cost is expensive and may shock you—can amount to double the cost of regular home insurance
- If your insurance lapses, you may be considered a moral hazard and a greater risk by insurance companies. So it can become increasingly difficult and even more expensive to obtain insurance
Talk to your insurance company or broker early. Price the home to sell so that it does not linger beyond the coverage period. Think twice before you consider risking no insurance coverage!
Eugene Pilato is the broker of record at Century 21 Today Realty Ltd. in Fort Erie, Ontario.