Children often face a great many challenges following the death of a parent. Unfortunately, one issue often is not apparent to the offspring when Mom and Dad are gone: the insurance which the folks had for half a century for the family home needs a check-up as soon as the kids can make it happen.
For many families, this insurance review never occurs; the house gets sold before any issues arise and nobody is ever the wiser about the inadequate insurance coverage. Sadly, an all too frequent occurrence following the death of a homeowner before the home gets sold is the advent of the uninvited house guest.
“Sometimes teenagers find out the house is empty and they throw a party,” explains Gary Remland of Remland Insurance in Orange. “Or it might be a professional who wants to get Mom’s jewels or the family computer.Whoever it is, the tragedy is that a family which just experienced the loss of a loved one may well be facing an uninsured loss if the kids don’t let the insurance agent know that the home is no longer owner occupied.”
The remedy for the empty home following the parents’ deaths is to meet with the insurance agent to advise him or her of the changed status of the living arrangements. The agent needs to be aware of whether the home is going to be occupied by one of the children of the deceased as an interim security measure, to keep the teens at bay, whether the home will be rented for either a short term or for a long term lessee, or whether the home will no longer be occupied at all.
“Any change in who lives in the home needs to be addressed by the insurance agent to make sure that the homeowner’s policy will cover the different circumstances,” says Agent Remland, “since every policy that is written gets its rates and coverage issued based on the facts given to the agent at the time of the purchase of the policy. If the facts– the occupancy of the home– change, then the coverage may be either reduced or even eliminated.”
Most people who are serving as trustees for a late parent’s home use an attorney’s office to assist in the administration of the trust estate, so that these matters are handled by people who have dealt with the issues before. For those trustees who do the administration on their own, it is vital to review a number of critical insurance issues from the outset. In addition to the problems of a homeowner’s policy which was intended to insure a house which the homeowner lived in, Remland explains other concerns that the trustee should address.
Any change in who lives in the home needs to be addressed by the insurance agent to make sure that the homeowner’s policy will cover the different circumstances
“It is crucial to be certain that the trust is listed as an additional insured under the homeowner’s policy,” Remland suggests, “and doing that is very simple. What gets complex is what happens if there is damage to the home when the ownership is not properly listed on the declaration page of the policy.”
Beyond the “additional insured” provision in the insurance policy, it is also highly advisable for the original trust to provide terms for flexibility for the management of the family home after the parents’ deaths. For example, many of the trusts which face administration do not allow for any treatment of the home beyond either a provision for immediately either selling or for distributing it to a beneficiary. During downturns in the real estate market, it is often an advantage for a trustee to have more latitude in the steps which he or she can take in handling the home.
Some trustees save the beneficiaries from a distress sale price by either renting the home for a period of time to allow the price to recover, or by allowing one of the children of the deceased to live in the home for that same recovery period. In either instance, the trustee needs to be certain of two factors: first, that the trust allows such an occupation, and second, that the trustee has contacted the insurance agent for the home owner policy to be certain that the coverage continues during the administration of the trust.