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VISUALIZE | INSIGHTS THAT POWER INNOVATION

How can changes in home ownership and occupancy create hidden risks?

When homeowners actively reside in their home, they’re often able to spot maintenance issues that may otherwise go unnoticed if it’s vacant. You’ll spot the puddle of water pooling near the foundation before it leads to water damage or structural issues. The broken outlet or tripping circuit breaker will likely be caught before it places the home at risk for fire damage. And if there’s storm damage that impacts your roof, you’ll likely catch the leak and make the fix before it leads to severe water damage. 

When a homeowner actively resides in their home, they’re often able to spot maintenance issues that may otherwise go unnoticed if it’s vacant

The ideal situation is not always reality – life happens, leading people to miss necessary maintenance or leave properties altogether.

Ideally, homeowners reside in their properties year-round and perform the necessary upkeep to maintain their properties in a timely fashion to help protect their investments. However, the ideal situation is not always reality; life happens, leading people to miss necessary maintenance or leave properties altogether.

Key activities for monitoring

Knowing a property's history, including changes in ownership and occupancy, is essential for insurers, as these events can paint a vivid picture of a property's condition and potential claims down the line.

  • Vacancies, foreclosures, and ownership status: Nearly one in every 100 properties on an insurer's book is vacant, according to Verisk analysis. As more properties are left uninhabited, several types of conditions can lead to claims. This can include water damage, debris risk, electric risk, roof deterioration, and theft/vandalism. Additionally, foreclosures and new mortgage activity can indicate a lack of maintenance and signal condition issues.
  • Rentals and other misclassified risks: According to Verisk research, nearly 22 percent of rental listings are covered under homeowners insurance programs, rather than a dwelling policy. Misclassification can lead to additional liability risks if maintenance issues go undetected or the property is left vacant for an extended period of time. 
  • Additional wear and tear from an increased resident count: Increases or decreases in resident count are another factor that can contribute to risk. This can be monitored by considering how many residents reside in the home by bedrooms or square footage. With more people in a home, there is an increased rate of wear and tear and greater susceptibility for loss from potential hazards.

Opportunities to manage hidden risk

Changes in occupancy or ownership can be a helpful indicator for potential condition issues happening at the property. Just as a homeowner seeks to avoid the nightmare of mold or structural issues, an insurer likely wants to avoid the hazards that lead to these problems. Looking for these flags proactively can help insurers find policies that have hidden risks and help reduce adverse selection.

Life Cycle Whitepaper 2 1

The Life Cycle of a Property: Uncovering Property Changes and Hidden Risks to Support Insurance to Value

Identify ownership and occupancy data right from the start. Read our latest white paper to learn more.

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Alli Sarfaty

Alli Sarfaty is a product manager in personal property at Verisk. She can be reached at Alexandra.Sarfaty@verisk.com.


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