Insurance Industry Expert: Showhomes Solves Vacant Home Coverage Problems
Jack Hungelmann, an insurance industry expert and author of the bestselling ‘Insurance for Dummies’ book, recently published an online article about the issues owners of vacant homes have with homeowner’s insurance.
In his article: “Showhomes” Solves the Coverage Problems of Home Vacancy“, Hunglemann had this to say about Showhomes:
How Showhomes Works
Showhomes solves both the vacancy and unoccupancy problems. A resident manager moves in and completely furnishes the place. The manager takes care of the premises, including lawn care, snow removal, etc., and pays the utilities. The manager also keeps the home neat and ready for showing at any hour. When a prospective buyer comes through the home, they see that it is clearly cared for inside and out. There is food in the fridge and clothes in the closet. Prospective buyers pay more and buy more quickly in an occupied, nicely furnished home.
Resident managers pay Showhomes a monthly rent, about a third of the rental value for that type of home in the rental market.
Features of the Showhomes Homeowner Contract
I’ve read the Showhomes’ contract. From a risk management perspective, it’s quite reasonable to both parties. Note the following.
- Insurance Obligations—Showhomes agrees to carry general liability for injuries and property damage to the public, special perils legal liability coverage for damage to the home itself, and workers compensation. The homeowner agrees to continue the insurance on the home.
- Mutual Waiver of Subrogation—Both parties agree to waive claims against the other to the extent the loss is covered by their own insurance.
- Mutual Indemnity Agreement—Both parties agree to defend and pay any judgment against each other when one party is sued due to the sole negligence of the other party.
There are several benefits to the owner of a vacant home of the Showhomes relationship:
- The home is no longer vacant or unoccupied—ergo, no exclusion for glass, vandalism, or arson.
- The insurance is no longer at risk of being immediately canceled. In fact, the homeowners policy underwriter may elect to continue the homeowners policy. The home is now occupied by a “caretaker,” and the homeowner is not receiving rental income from the resident manager.
- If the policy must be rewritten due to the fact that it is no longer owner-occupied, the home should be eligible for a preferred market dwelling fire policy. This means preferred rates and broad coverages, thus avoiding the high-priced limited-coverage specialty marketplace.
- There is a high probability of a quick home sale at a better price.
- It transfers the maintenance and responsibility for utilities to the resident manager. This is especially an advantage if the owner of the home has moved to another area. (The resident managers won’t however scrape up your doggie poops, nor will they clean your swimming pool!)
Showhomes is a near-perfect solution for homeowners that have a vacant home. Vacant homes are a hand grenade when it comes to insurance; often the only option for an owner is to pay 400% more for a policy that has less coverage.
Fortunately, with Showhomes, owners get a perfectly staged and occupied home that looks and shows well. Because we carry specialized insurance, the homeowner can often get a far less expensive policy that costs less and covers more.
Tags: vaacant homes