Home Insurance – Page 3 – Avant-Garde Insurance Advisors

Recently, I had a client call me regarding the purchase of a new property.

I went through the typical questions I would ask…

What’s the address?

Do you have a settlement date?

Is it a business or personal property?

How do you plan to use the property?

Who will reside at the property?

Who will own it?

It is not uncommon to get all green lights until you get to the last question. Business entities are a tricky business in the personal insurance arena. They are not impossible just tricky.

Insurance companies get a little crazy when you start talking business entities owning personal properties. A business has a different kind of exposure or risk and therefore has different insurance needs. Personal insurance policies are not designed to meet those needs and ultimately a business entity could put an insurance company in quite a pickle if a claim happens.

An LLC can sometimes be done if the LLC is formed solely for the purpose of holding a single residential property. The LLC should not conduct any other business and should not employ anyone. There may be tax benefits to an LLC but you need to weigh the tax benefits against the issues that arise when it comes to insuring the property in the name of an LLC.

Trusts can also be done but every insurance company is different. Some will name the trust as Named Insured, some as Additional Insured, some require a special endorsement for naming the trust. Only your insurance company will be able to tell you how the trust can be named.

Estates are tricky in that typically the estate was developed to hold assets for a person that has passed away. An insurance company would shy away from this type of situation because it is unknown who will live in the home, who will take care of the home, will the home be vacant, is it for sale, how long will the estate exist? The answers to these questions have an additional amount of risk associated with it and the insurance company may not want to take on that risk.

Regardless of what your plans are, you should always consult with your insurance agent on what your plans are before committing to them. You may not be able to get the coverage you thought you could or need.

Pamela

I have several clients right now that have properties up for sale. All of them hope to have a favorable offer and sell the property quickly but that is not always possible.

As winter starts to approach the real estate market starts to cool down a little. So for clients hoping that their property will sell they may face the prospect of holding onto it through the winter season.

This type of situation begins the conversation I must have with clients that are facing the unknown but hoping for the best.

Are you still living at the property? Is it occupied? Do you plan to rent it? Is the home vacant? Does any one visit the property? What is your plan? When do you feel you can rent it or sell it?

Some of these questions can be challenging for a client.

Here is a brief definition of each scenario…

Occupied: It’s occupied by you or by another immediate member of your household; spouse, daughter, son, etc.

Rented: The property is rented out to an unknown individual or distant relative either temporarily until the home sells or permanently. There is a written lease agreement of some type. However, most insurance companies ask that the property be rented on an annual lease agreement.

Unoccupied: No people live at the property. It may be fully or sparsely furnished. It may only house a few items or used for storage. Any one that visited the property would be able to tell the home is not furnished for daily use. This type of scenario may lead an insurance company to believe the property is vacant.

Vacant: The property is absent of people and all contents. No visitors or occasional visitors. This is a big red flag for insurance companies and could result in swift termination of the policy.

If a client holds onto a property that is unoccupied or vacant they run the risk of not having coverage when a loss happens. The policy will specify what occupancy is acceptable under the policy. The policy will also define when coverage starts to fall away if the property is unoccupied or vacant.

No one thinks it will happen to them but during the cold months the number one cause of loss is frozen pipes bursting. If pipes burst when the home is unoccupied or vacant the claim may be denied.

I understand the strain my clients are under when they are forced to hold onto a property longer than they wish. That being said there are insurance products out there to address each of these situations.

Always err on the side of caution and call your agent to discuss your situation.

Category: Home Insurance

LLCs, Trusts, and Estates

Occupied… Rented… Unoccupied… Vacant…