Losing a loved one is always overwhelming. There is so much to do as you prepare for a funeral and settle their affairs, but if you inherit a home, there are some important steps you need to take right away to ensure there is no lapse in coverage for the property.
CALL THE INSURANCE AGENT
Make sure you call your loved one’s insurance agent as soon as you can. Let them know the policyholder has passed away and you are now the legal representative for their estate. Aside from providing your name and contact information, the insurance company may also need the following documents to transfer everything to your name:
- A death certificate for your loved one
- A letter of administration, which proves your legal status
Ask the insurance agent to provide you with a copy of the policy if you don’t already have it. Have the agent go through the policy with you to make sure you understand the terms and conditions. Some important things to note in this conversation are:
- Who owns the home
- How will the property be used (i.e., will you be moving in, renting it out, selling it?)
- The policy’s expiration date
- How are payments made (i.e., escrow account, direct payment)
Since the title of the property has changed, a new policy may need to be written under the new owner and with the appropriate coverage to ensure the property is adequately covered. For instance, if you plan to rent out the home and it’s currently written under a homeowner’s policy (the owner resides there), you will have coverage gaps. The agent can advise you on the right policy for your situation and use of the home.
The agent may also perform an evaluation of the property to ensure the insurance coverage remains adequate for the structure of the home, your personal possessions (should you choose to move in), additional expenses such as alternate living arrangements while the home is being repaired, and your liability to others.
To avoid surprises, be sure to ask the insurance agent about hurricane and flood insurance as well. If the mortgage on the home was paid off by your loved one, they may have opted to discontinue coverage. The absence of coverage could cost you in the event of a flood or hurricane.
PLAN AHEAD FOR YOUR HEIRS
Trusts are the most common way to ensure a property passes onto your heirs and to avoid a lengthy probate process. Make sure to add your trust to your insurance policy to recognize the ownership change and to cover your trust, as it is the new owner of the property.
KEEP PAYING THE PREMIUM
Always pay your premiums on a timely basis. If you miss payments, your policy may be cancelled, and if there’s still a mortgage on the home, the bank could force place a policy on the property to protect their own financial interests, but you would be responsible for the bill. These policies are sometimes twice as high as a typical homeowner’s insurance policy, but offer less coverage.
Also, if you’re planning to sell the house, don’t try to get by without having a valid policy until the property changes hands. It could cost you much more in the end if there’s an unforeseen loss. The bottom line is, you can’t file a claim unless the homeowner’s policy is active.
TAKE CARE OF THE HOME
As you prepare to take over the property, it’s smart to have the home inspected to make sure it is structurally sound. This will help you 1) plan for repairs as needed and 2) ensure you have the right amount of coverage. If you don’t live at the home, make sure you check on the property once or twice a week and keep it in habitable condition.
If you’re unable to do that, consider hiring a property manager to help you care for the home. This way if there’s a water leak or other event that leads to significant damage, you can file a claim faster and home repairs can happen in a timely manner, which can help minimize serious damage.
You can find an agent and get a quote for a FICOH homeowner’s policy here.