Homeowners Insurance on Inherited Property: What You Need To Know

Acquiring a home entails additional liability and property damage risks. That means you should ensure you have the appropriate form of insurance to safeguard your assets. Depending on your home plans, you have numerous insurance options.

What Are Insurance Options Available for an Inherited House?

1.) Homeowners Insurance

You do not immediately inherit the deceased homeowner's insurance when you inherit a home. You must obtain your policy. Unless you intend to relocate, you are unlikely to qualify for a standard policy.

Homeowner's insurance is only applicable to the policyholder's principal house. They often exclude coverage for homes that are left uninhabited for 30 days or more.

If you do not intend to live in the home, it is almost certain that you will be unable to obtain a regular homeowner's insurance coverage on the property once it transfers.

2.) Policy on Unoccupied Property

Insurance companies are in the risk industry, and they are well aware that unoccupied homes are attractive to vandals and criminals. Additionally, when a property is vacant, no one is present to prepare for storms or ensure that a little leak or electrical issue does not develop into a big flood or fire.

Unoccupied insurance plans can be highly costly due to the higher risk. The good news is that you may be able to acquire a policy that covers the property for at least three to six months while you prepare to sell, which is a less expensive option than purchasing a year-long coverage.

3. Insurance for Landlords

Assume you decide to rent the residence. As a landlord, you want to safeguard your property. This necessitates the purchase of a landlord insurance policy, commonly known as a rental property policy. Rental policies insure you against a variety of sorts of property damage.

Additionally, they give liability protection if someone is injured on your property. When purchasing a landlord policy, it is crucial to ensure that you have adequate coverage. Additionally, you may wish to consider purchasing umbrella coverage for increased security and peace of mind.

4. Insurance for a Second Home

Perhaps your loved one had property at a popular vacation area or another location close to your heart. You will then require second house insurance.

As with unoccupied property insurance, second house insurance is more expensive than a standard homeowner's policy since it accounts for the increased risk of the home being uninhabited for extended periods.

Is It Possible to Insure a House That Is Not Your Own?

Homeowners insurance helps safeguard your valuables, which may include an inherited residence. However, what if the property you inherited was not registered in your name? Is it feasible to insure a residence that does not include your name on the deed?

In a nutshell, you can insure a home that is not registered in your name. However, this policy form does not provide the entire coverage you require.

When you cover a home not legally yours, you are essentially paying the legal owner's insurance bill. It's almost as if you're extending a loan to the legal owner to cover the insurance cost.

Why? Because it is quite difficult to locate a policy that specifically mentions a party lacking "insurable interest." While an insurer may allow you to make payments on a policy, you will almost certainly face a lawsuit if you ever make a claim. Bear in mind that courts generally hold that a policy's protections must be plainly defined to be effective.

Of course, there are exceptions.

For example, if an LLC or a trust owns the residence, it may make sense to get insurance in your name... so long as you can demonstrate an ownership interest in the entity that owns the property.

This comes down to one critical fact: the insurance company makes the final determination.

If you can demonstrate an interest in the property, they are more likely to put you on a policy. If you wish to pass the insurable interest test, you must be prepared to provide adequate paperwork to support your claim.

How Do You Modify the Name on Your Homeowner's Insurance Policy?

When you inherit a home, it is reasonable to assume that you also inherit the insurance coverage that protects it. However, simply paying the insurance payment does not guarantee that you are insured.

In general, a policy will continue to cover the property after the owner dies; check the policy terms to establish the length of the grace period. This should provide you with sufficient time to amend the policy to incorporate your name.

To make this critical adjustment, you must contact your insurance carrier and request that you be listed as the "insured intended." You'll offer the insurer information about the deceased, such as their name, date of death, address, and policy number.

Additionally, the insurer may want evidence of your interest and supporting paperwork, such as a death certificate and documentation establishing your status as executor.