Property and Casualty Insurance Practice Exam

What happens if a property is unoccupied for more than 60 days?

1. The insurer automatically increases coverage limits

2. Coverage may be reduced or terminated

3. The insurance policy becomes invalid

4. Premiums are refunded to the insured

The correct answer is: Coverage may be reduced or terminated

When a property is unoccupied for more than 60 days, coverage may be reduced or terminated due to increased risks associated with unoccupied properties. Insurance policies often include specific provisions that address the condition of a property being unoccupied for an extended period. Insurers recognize that vacant properties are more susceptible to risks such as theft, vandalism, and deterioration, which can lead to potential claims. As a result, many insurance policies will stipulate that after a certain period of vacancy, the coverage will be modified, potentially reducing the extent of protection or completely terminating certain types of coverage. This serves to protect the insurer from heightened risk exposure while also prompting property owners to be aware of the additional responsibilities that come with maintaining empty properties. The other options do not accurately reflect standard practices in property insurance related to prolonged unoccupancy. Therefore, recognizing that coverage may be reduced or terminated is crucial for property owners in managing their risks and understanding the terms of their insurance policies.