Vacant land has become an increasingly appealing investment, particularly in the age of social distancing and skyrocketing home and rent costs.
If you’re looking to join the growing ranks of landowners, you should consider insuring your investment. This may sound strange, as there’s nothing that can be damaged or replaced on an empty plot, but undeveloped land has its own liability issues — and its own insurance. It’s not legally required, but you’re leaving yourself open to liability without it.
Home and auto insurance covers physical property like homes or cars: things that can catch fire or harm another person. Home insurance policies also come with some form of general liability insurance that covers things like medical payments for bodily injury (from, say, a tumble down the front stairs).
If you look at your home insurance policy, though, you’ll see that it doesn’t cover the land that your belongings are atop. The land is also excluded from property valuation when determining the limits for a total loss because there’s nothing to rebuild when it comes to land.
Despite its name, land insurance isn’t really for the land itself; it’s for the things that can happen while people are on it.
Vacant land and liability
You could be held liable for the harm someone causes to themselves or someone else while on your land, even if they're illegally trespassing. The best signage in the world may not prevent an accident resulting from:
- Target practice
- Driving all-terrain vehicles
- Hiking and walking
- Exploring artificial or natural structures
Children pose a unique liability risk because they're not held to the same standards of responsibility as adults are. If you have a pond that makes for a great swimming spot (or an ice rink in winter), you might want to double down on the signage and the insurance. Like swimming pools, ponds can be considered attractive nuisances.
The sky’s the limit on what could go wrong and what people will sue for, especially since no one is there to monitor the activities. You could set up surveillance systems to help your case in court, but that doesn’t help you with the cost required to defend yourself (regardless of who wins), and it’s not a guarantee that you’ll prevail.
A word on vacant land and outbuildings
Let your agent know if you have any structures or outbuildings on your vacant property (like barns, hunting sheds, tree houses or storage sheds). If you fail to do this, you could void your entire policy. You'll want coverage in case the buildings are damaged and (more importantly) in case someone is injured while using them. Some land insurance offers add-ons for simple structures, or you can purchase a stand-alone policy for them.
Have the land inspected
Before finalizing your transaction, always check with your insurance agent and lawyer about local ordinances and zoning laws. (A deal that looks too good to be true might be a disaster in disguise.) Vacant land can become a dumping ground, which can lead to infestations and pollution liabilities, so it’s a good idea to get an assessment to reveal any burrowing rodents or contaminants. You could be held responsible for the damage even if it occurred before you owned the land.
Land insurance protects your budget
All the money you invested in your land might end up in someone else’s pocket if you don't have enough liability insurance. Land insurance can help with liability related to:
- Medical payments (due to bodily injury sustained on your property)
- Legal fees (to mount a legal defense against a lawsuit)
- Settlement costs (to pay for out-of-court payments to settle a case)
Cost and other insurance considerations
Some homeowners policies offer vacant land coverage by endorsement. The cost of land insurance is anywhere from $15 to $150 per month. Coverage usually starts at $1 million per occurrence. The policy price depends on the size of the tract, geographic region, zoning, land features, water features, and how much coverage you want.
- If you rent your land for farming, you’ll have a longer list of liabilities. Business liability insurance is in order, and possibly environmental insurance (for issues like pesticide use). You’ll also want to verify the farmer’s coverage.
- If you use your property for recreational activities, land insurance helps if an invited guest or someone else gets hurt.
- If you develop your land and build structures on it later, you can transfer your coverage to a new home construction insurance policy.
Being a landowner is a great feeling. Give your agent a call to help you defend against unforeseen land liabilities and tame the wilderness (just a little) with vacant land insurance.