Handling homeowner’s insurance is one of the many aspects that an executor must manage after the death of a loved one. And while you are grieving the loss, if there is a house, it is often one of the first places you visit and immediately start thinking…what are my responsibilities?
While it may be apparent that the utilities must be paid and the property secured, one item that often arises is how to handle the insurance. A challenge may exist to find out if the house is insured and what coverage exists. As the executor, you may want to look through the important documents of the deceased, including any mortgage paperwork, to ascertain if the homeowner’s policy is in effect and paid to date. It is recommended to have the policy in effect during estate administration as the executor has a fiduciary duty to protect the assets of the decedent. If a fire, flood, or theft may occur, there may be an opportunity for a claim to be filed.
So the question presents itself as how to title the policy. It is best to speak with the insurance company or agent for options as to who must own the policy and whether any of the coverage terms will change. Depending on the company, policies may be written as owner-occupied for a primary residence, and the contract may state that the policy is not transferable. Some policies may state the owner would need to be the estate. Others may require that the Personal Representative be listed on the policy. Also, some companies may not provide coverage on a decedent’s property as it does not insure estates, or advise that a vacant home policy must be purchased. Of course, it is up to the carrier to underwrite the policy, and the estate or heirs should expect to pay higher premiums for this type of coverage.
Most insurance companies prefer that executors or heirs contact them as they do not like houses to remain vacant for an extended period of time. It may be prudent to put the notification in writing and a copy of the death certificate may be requested. After death, it is usually the case that no one is in the house daily, or potentially even weekly, and thus, it is more prone to vandalism or other problems that occur from the lack of maintenance. The insurance company may offer a grace period of 60 to 90 days, or longer, before the policy is deemed to be in default and exclude coverage. Also, it may be a condition of the mortgage contract that insurance is in effect. Eventually, when the distribution occurs during administration, the new owner will secure coverage.
Also, you may want to check if the homeowner had any coverage riders. In some cases, there may be a type of mortgage life insurance attached to the policy whereby the insurance company will pay the mortgage when the homeowner dies. This would help alleviate the burden of an estate expense or provide the house free and clear to the beneficiaries.
It is important to examine the coverage existing on the deceased’s property and the time frames in which actions must be taken to preserve the insurance. Speaking with the company will help clarify contractual provisions and how to protect one of the most valuable assets of the estate.
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