A common misconception we see is property owners thinking that because their building is vacant there will be no affect on their premium. The logic is sound. There is no one on the property to cause damage and thus there will be no claims. However, the reality is that vacant and unoccupied buildings bring with them increased premiums. This is because they have an increased risk of filing certain kinds of claims. Insurance companies will always see an increased risk on paper when they deal with vacant properties.
Insurance companies have three main arguments for higher premiums on vacancies.
Lack of Property Upkeep
One reason for this rise is lack of property upkeep. While you may be maintaining your property just fine, insurance companies always view an occupied property as having better upkeep than a vacant property. Think of it like this. There are two individuals shopping for health insurance. One individual is young, eats healthy and exercises but smokes cigarettes. The other individual is also young but does not eat healthy or exercise and is a non-smoker. Some health insurance plans will charge a higher premium to the smoker regardless of there other healthy habits.
Lack of Security
Another reason for the increased premium is lack of security on the property. Burglars always look for the easiest target. Buildings without people are easy targets. Regardless of the value of on site assets, insurance companies see vacant properties as more prone to break-ins then occupied properties. Even if there is nothing to steal, a break-in can result in vandalism and damage to the property.
Lack of Ability to Prevent Emergencies
A third reason for vacancies leading to increased premiums is a lack of ability to prevent emergencies on the property. Routinely using a building means you are more likely to spot potential hazards such as faulty wiring or machinery breakdown.
Every municipality has its own set of rules and regulations in regards to vacancies. Luckily, our Illinois state government has a great online resource to review any changes in legislation that occur. On municode.com you can search by municipality and read the actual legislation that dictates the rights and responsibilities of property owners.
Before You Claim Vacancy
Not using a property does not make that property less likely to incur claims. Vacant buildings have a certain set of claims that they are more likely to experience than occupied buildings. Insurance companies deal with the increased risk of vacant buildings through increased plan premiums.
Before you claim vacancy on a property contact your insurance agent to discuss how the vacancy will affect your policies. Having a little extra insight can go a long way in determining the best approach for your business. There are also specific coverage options for vacant and unoccupied buildings.