Can Business Insurance be Obtained on a Vacant Commercial Business?

Question: Can business insurance be obtained on a vacant commercial business? Will a vacant property that is being purchased be considered “vacant” during the renovation? I need to purchase a insurance policy but I am being told a lot of different alternatives. My main concern is if the property is unoccupied but being renovated is that considered vacant under an Arizona commercial insurance policy.

Answer: This question was posed by one of my clients, but there was a little more to the question. He was purchasing a vacant building with a plan to renovate it so that it would more desirable to potential companies looking for quality space to lease. He was worried that the insurance policy he had purchased wouldn’t be valid because it was a vacant property.

The first thing we did was to secure a builder’s risk policy to cover the renovations on the building. The client had planned to put about three hundred thousand dollars worth of renovations into the building, bringing the total, including what he had purchased the building for, to a million dollars. The project was estimated to take between four and six months. We wrote the policy for a seven month period, making sure we were covered, since, as most people know, there are always delays and we covered the entire investment of $1,000,000.

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After the improvements were completed, my client was not quite sure how long the property would be vacant until he found the right tenant. Most insurance companies will consider a property vacant after 60 consecutive days where the property has 65%-70% or more of its square footage not rented out for the purpose it was intended for. In fact, most Phoenix property policies when considering a property vacant, there would usually be no coverage at all for the following perils: water related damage, vandalism, theft, and glass breakage. We sat down with the client and found the right carrier and coverage for his vacant property. Most of these policies are written on a 3-month basis, but often can be extended up to a year.

If you own a property that is vacant, we invite you to sit down with the experienced brokers at PJO Insurance Brokerage in Phoenix Arizona, and conduct a full review of your existing insurance. The last thing that you want to find out when something happens to your property is that your current policy will not cover it.