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With the housing market in its current state, there are more foreclosed homes up for grabs than usual. Some individuals are able to take advantage of this situation and purchase a home for much less than what it is worth. While many of these houses are in good condition, some are in need of extensive amounts of repair, which brings us to the topic of this month’s column: What is the difference between construction of a property and renovation of a property, and how is coverage affected?

I have received a number of questions at FC&S lately regarding the difference between construction and renovation. Many people feel that if a house is being extensively renovated, then the policy exception stating that a home being constructed is not vacant would apply, and that a home under renovation would not be considered vacant. For example, a recent subscriber asked about an insured who purchased a foreclosed home and took out a non-owner-occupied policy on the dwelling. The property needed significant framing work, which the insured was completing while the property stood uninhabited. Although the insured was away from the premises, the property was broken into and vandalized. The carrier, however, denied the loss because the property was vacant. The subscriber felt that since the property was “under construction,” then the exception should have applied. But does it?

Stand By Me

The standard ISO homeowners’ policy contains an exclusion for vandalism and malicious mischief to any property that is vacant for 60 days before the loss. The exclusion’s exception states that “a dwelling being constructed is not considered vacant;” the policy, however, does not define construction.

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