When my father died and I inherited his house in Florida, the last thing on my mind was the status of his homeowners insurance policy. So I didn't notify the insurance company about his death, and I didn’t keep up with the premium payments. But when the cancellation notice arrived a few months later, suddenly, all I could think about was the insurance.
I quickly learned that there are many reasons why you don’t want to leave a house “bare,” or uninsured. The main one is that a home is, for many people, their biggest asset. If there’s damage to it—say from a storm—it could cost you a great deal to repair it. And if you’re planning to renovate or sell the home, it’s a good idea to have insurance. If a contractor, or maybe a real estate agent, gets hurt at the house and decides to sue you, the liability coverage, which is included in some homeowners policies, could protect you.
Lawrence Lehmann, a New Orleans-based estate planning lawyer, urges heirs to be proactive about reaching out to the insurance company to make sure the home is properly insured. "The worse thing that can happen is the unknown," says Lehmann.
What to Do
If you inherit the home of a family member, take a few simple steps to protect the home. Here’s what to do.
Call the homeowners insurance agent. If you are a surviving spouse and you are named on the homeowners policy, you don’t need to worry. The existing policy will continue. Let the insurer know that your spouse has died so that the policy information can be updated. You may need to send the agent a copy of the death certificate.
If you don’t have your name on the policy, or if all the people listed on the policy are deceased, the policy becomes the responsibility of the legal representative of the estate for the term of the policy. If that’s you, notify the insurance company that you are now their primary contact.
Not all insurers require the same proof, but Richard Johnson, a spokesman for USAA Insurance, says that his firm requires a letter of administration, which proves your legal status, as well as a death certificate. Other insurers may not require those documents.
Most insurance companies will keep the existing policy in place until the expiration date. But it’s important that you know how much time is left on the policy and if any payments are due so that you aren’t left with an uninsured home, says David Morales, a financial advisor with MassMutual.
Also, ask the agent to review the current policy in force, says Chip Merlin, a property law attorney in Tampa, Fla. You want to know what the policy covers. Request a copy of the policy, if you are not able to find it.
Keep paying the insurance premium. Be sure to make payment on a timely basis. You need to know how the payments are made—through a mortgage escrow account or directly to the company.
Unfortunately, even if you do continue to make timely payments, insurance companies can cancel a policy by giving you 30 to 45 days notice. Also, keep in mind that if you do let payments slip, there may not be a grace period and at that point, the insurer can cancel with as little as 10 days notice, though rules vary by state.
If you miss payments and you have a mortgage on the house, the lender has the right to place a policy on the house to protect its financial interest, but bill you for it. That can be bad news because this type of policy can cost twice as much as a standard homeowners policy and provide less coverage, says Birny Birnbaum, executive director of the Center for Economic Justice.
Look after the property. To keep the homeowners insurance policy active, insurance companies like to see that someone is living in the home. If that is not possible, try to keep the house in habitable condition with furniture and personal items in place so that a person could reasonably live there.
Check on the property once or twice a week or ask someone to do so. If there is no available person to check on the house, a realtor can help you to find a property manager. By doing this, the insurance company knows that the home is being cared for and may be less likely to cancel the policy.
A burst pipe, for example, could lead to significant damage if left unrepaired for weeks, says David Kenny, an assistant vice president at Amica Mutual Insurance. But if the problem is caught early, the damage could be minimized.
Ultimately, you will need to get a new insurance policy since the policyholders are no longer alive. But these steps will help you to keep the existing policy in place until the policy expiration date.
Research homeowners insurance plans. You will, eventually, need to get a new policy. There's no reason to simply take a policy with the same company that insured the house before. Bob Hunter, director of insurance for Consumer Federation of America, says that many states offer online tools that let you compare insurance rates, and confirm that the insurer you are considering is licensed in the state. Visit the National Association of Insurance Commissioners website to find your state insurance department.
