Vacant to Lessor's Risk: A Guide for Insurance Agents Managing Properties in Transition Part Two

In real estate, investments are power, and insurance helps protect those investments. There are over 151 million properties in the United States (NAR, 2024), and about 10% of them are sitting vacant/unoccupied (USAFacts, 2023). This gives insurance agents plenty of opportunities to write more accounts. Whether you're insuring a property that’s temporarily vacant or getting it ready for future tenants, it’s important to understand how property insurance works. Here’s how you can make the insurance process easier, keep your clients happy, and win the account when the property is vacant—and keep it when it becomes an occupied as a lessor's risk. In part one, we navigated writing vacant policies. In part two of this blog series, we examine the transition from a vacant policy to a lessor's risk.

Step Three: Switch Vacant Policies to Lessor's Risk Policies (LRO)

Great news—your client’s vacant property has a new lease! Even better, you planned ahead and asked who the next tenant might be. Lessor's risk policies (LROs) can cover many types of tenants, whether they’re commercial, residential, or both. For example, a restaurant tenant has very different risks compared to a daycare or apartment tenant. Knowing this ahead of time gives you more time to find the right additional coverages, such as:

• Business Interruption Insurance: This helps cover lost rental income if the property can’t be used because of a covered loss.
• Excess Liability Limits: Commercial properties or short-term and large-scale rentals often need higher liability coverage because of increased foot traffic and a greater chance of accidents or injuries.
• Cyber Liability: If the landlord offers shared network services, this coverage helps protect against data breaches.

Planning ahead makes it easier to switch to an LRO policy with the right protection for the new tenant.

Step Four: Study the Market

If you haven’t heard about the hard property market, you might be out of the loop—especially for LROs. Carriers are becoming stricter with their policies because of climate change and large legal settlements (nuclear verdicts- read more). It’s your job as an agent to keep up with market changes and carrier rules.

Johnston Stakely, Lead Underwriter at Pathpoint, explains, “Carrier appetites have shifted. Some risks they used to accept, they now avoid completely. For example, certain tenants are seen as higher risk. One example is LROs with tenants operating bike shops. Those selling e-bikes are now ineligible because lithium batteries can sometimes catch fire, creating a serious risk. Agents should work with an MGA that has strong market access and plenty of options—like Pathpoint.”

Staying informed about the market can help you better guide your clients and find the right coverage for their needs.

Step Five: Partner with Pathpoint

Pathpoint is the fastest and easiest wholesaler to work with for quoting small E&S accounts like vacants and LROs. We work with multiple AM Best A-rated or higher carriers to provide flexible options for a wide range of properties, including coastal properties, buildings under renovation, and even older structures. Plus, you are never alone in remembering market appetites, as you are assigned a dedicated Account Manager (AM) to assist you at a moment's notice.

Our AMs have studied carrier appetites on your behalf- like Northern California Account Manager Pri Medrzycki shares her knowledge, “Westchester accepts structures built as far back as 1850. For buildings over 50 years old, updates to electrical, plumbing, roofing, and HVAC systems must have been done within the last 20 years.” Pathpoint also offers important coverages like theft, vandalism, and additional insured coverage. Agents can get quotes for vacant land and buildings in just six minutes.

Pathpoint makes it easy to switch to an LRO policy when the vacant property is leased. Choose from multiple AM Best A-rated markets for over 20 tenant types, including hard-to-place tenants like new businesses, short-term rentals, and legal marijuana operations. Coverage options include:

• $1M/$2M general liability limits
• LRO Property coverage up to $3.3M TIV per location and $5.6M TIV per policy nationwide
• Higher property limits for hurricane-prone states, with wind deductibles as low as 1% and TIVs up to $10M
• Excess liability for popular classes like apartments, dwellings, commercial buildings, and warehouses

If the lease ends, you can quickly obtain a new vacant policy. With Pathpoint, you can find multiple competitive options for your LROs faster than brewing a cup of coffee!

Follow the Steps to Success with Habitational Insurance

Handling transitional properties in insurance can be tricky, but with the right approach, agents can make it easier. To succeed, agents should plan carefully, stay up-to-date on industry changes, and communicate well with clients and partners. This will help them overcome challenges and make the most of opportunities throughout the entire life of a building, from when it’s vacant to when it’s occupied.

Convert your vacant accounts to a lessor's risk today.

National Association of REALTORS (2024, July 7). Quick Real Estate Statistics. Retrieved October 31, 2024, from website.

USAFacts Team (2023, October 13). How many vacant homes are there in the US? USA Facts. Retrieved October 31, 2024, from website.