When is Vacant Home Insurance Necessary?
When something significant happens in life, like a loved one’s passing or a parent moving to assisted living, it can bring about big responsibilities for those in charge of making decisions for them. Whether you're appointed by a probate court to handle an estate or chosen by someone to manage their health and business affairs, there's a lot to learn. If you're dealing with a property that will be empty for a while, it's crucial to be well-informed.
If nobody is living in a house, the existing homeowner's insurance policy may not be adequate due to the individual circumstances. This means if something bad happens, like a water leak, a storm, or a fire it is quite possible that none of the resulting damage may be covered. When a property is not being used, there's also the risk of break-ins or squatters, which can also be a huge headache if the property isn't properly insured.
Putting The Right Home Insurance In Place
Sometimes, people don't realize their property isn't protected until it's too late. Certain time limits may cause coverage to lapse without you even realizing it as the insurability status of the property changes. While each insurance company has its own rules, there are some common standards you should know about.
As a general rule, if a house has furniture and personal items, but no one is living there, it's considered unoccupied. If the property is completely empty, the insurance company will consider it vacant. Most companies will still cover an unoccupied home for a while, usually for 30-60 days, but if damage occurs to a vacant property, there's a significant risk that the claim could be denied, once the company knows that the property was empty at the time of the loss. These are the kind of circumstances can lead to a complete loss of the property.
If you’ve moved and your present home hasn’t sold yet, you’ve purchased another home and your present one will be vacant, or you are the court appointed representative, or attorney-in-fact who is responsible for protecting the value of real property assets, it is imperative that you know the limits of the existing policy in place. If there is a danger of it being voided due the occupancy status, you will need to take intentional action to immediately obtain an endorsement to upgrade the existing coverage or to take out a new vacant property policy all together. Experiencing a preventable total loss is a tragedy and, if you are a fiduciary, (someone with a legal obligation to act in behalf of another) you may even bear some legal responsibility due to your appointed role. It is only one of the reasons it makes sense to retain the services of an experienced attorney who has seen it all, and can pass that knowledge onto you.
Why Retaining Experienced Counsel is Essential When Acting on Behalf of Others
Here is a specific example of the importance of good counsel. Michigan is only one of five states where legal professionals who design estate plans for clients can use an instrument called the Enhanced Life Estate Deed, or more commonly known as a Ladybird Deed. This special deed allows a person to designate one, or more beneficiaries they wish to transfer ownership to their property upon their death, while still retaining complete control over the asset while they are alive. Because the transfer of ownership occurs only upon the event of their death, when that happens, the life estate terminates and the property transfers immediately to the beneficiary. Since the homeowner's insurance policy only covers the deceased party and the property now belongs to the new owner, (the beneficiary) there is now no insurance coverage and the new owner will need acquire their own homeowner’s policy immediately. If the grantor has received good legal counsel, one way they can mitigate any associated risk of loss is by adding the names of the beneficiaries to the existing homeowner’s policy prior to their death.
Whatever circumstances you find yourself in, it is wise to contact your insurance provider and ask the appropriate questions concerning the existing coverage. Many national insurance providers, such as Allstate, Progressive and State Farm underwrite vacant home insurance and, depending upon the company, coverages can be expanded to also include risks such as theft of personal property, vandalism and personal legal liability for events that occur on, or in the property.
Real property matters are often complex. When acting on behalf of others, it is crucial to have a good lawyer to help you address questions and to advise you in your specific circumstances. When the courts are involved, it is even more so. If you are in need of a referral to a competent legal professional, we’d be happy to make a recommendation from our very short list. You may leave us an email here.
(The author of this article and the owners of this website are not attorneys and the information presented here is not intended to constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Readers should contact their attorney to obtain advice with respect to any particular legal matter)