What is a Clear-Space Clause
A clear-space clause is a passage in some property insurance policies that stipulates that a certain insured property, asset group or other item covered by an insurance policy must be a specified distance from any surrounding properties.
BREAKING DOWN Clear-Space Clause
A clear-space clause is intended to limit liability by protecting surrounding structures and properties from potentially damaging or hazardous conditions. A home, building or other structure is much more likely to incur damage or loss if there are one or more other structures in close proximity. This increased risk is often considered by an insurance company, and even a lender, when evaluating potential risk through fire or a similar disaster. When a fire occurs in an area where properties are connected, semi-attached or in very close proximity, it is common for the fire to quickly spread from the originating source to adjoining properties, resulting in major damage or perhaps total destruction of numerous properties.
In a scenario where assets or properties are too close together, there is an increased likelihood that a single incident or disaster could result in numerous claims involving more than one property. This represents a heightened risk for the insurer of those properties.
Clear-space Clause and Perceived Risk
A clear-space clause applies to certain property insurance policies and is intended to ensure that all assets or properties are not simultaneously destroyed. For example, a potentially damaging or hazardous factory must be kept a certain distance away from residential properties or other such factories to avoid larger-scale claims.
Businesses or individuals who insure or have tried to insure properties that are situated in close proximity to other structures may have encountered issues when their insurer raised concerns about the layout of the locations and the properties contained within a specific area. This is less likely to be an objection with regards to homeowner’s insurance if the neighborhood contains just other homes, although attached properties such as row homes do tend to represent an increased risk for an insurance company. The bigger concern, though, would be a home that is located very close to a commercial enterprise such as a factory or warehouse. Unfortunately for that property owner, there is not much they can do to eliminate that risk. Depending on the particular location, however, there may be some steps the property owner can do, such as erecting a wall or other barrier between properties, that would help mitigate the perceived risk in the view of the insurance company.