There’s one real estate conundrum that might have you seeking expert advice: how to get homeowners insurance on a home you don’t own. While this might seem like a strange situation, it is common. It could be for people who might inherit a home, those who want to purchase homeowners insurance for a relative’s home or anyone who must start the homeowners’ insurance process before buying a home — since liability begins as soon as a deal closes on a home. This guide can help take the guesswork out of getting homeowners insurance on a home that you don’t own.
Does the home already have insurance?
If the home in question has a mortgage, then it’s likely that there is already insurance on the home. That’s because mortgage lenders require homeowners to carry insurance on any property that hasn’t been fully paid off. You’ll need to make sure the coverage is still active, and if it isn’t there could be penalties and even foreclosure on the house. If a house is already paid off, then it’s possible that there is no insurance on it, so you’ll need to ask the homeowner to be sure — even if the homeowner is a relative. Keep in mind that you might need to do some research, even consult a real estate expert or lawyer, to find out.
What do I do if I’m inheriting a house or it’s held by a trust?
When you inherit a house, you may be happy about the situation but chances are you’ll have some work on your hands to figure out if the insurance is in order. Even if the former owner had insurance on the home, you’ll need to get a new policy once you take over ownership. A different type of policy will be needed depending on if you plan on living in the house, want to keep it as a vacation home, or it will be vacant, even temporarily. Keep in mind that vacation homes and unoccupied homes may have higher premiums than primary residences. If you think you might want to sell soon after getting ownership, a short-term policy may be the way to go. If you have an interest in a trust or LLC, some insurance companies will sell a policy with limited coverage.
How do I get insurance on a home I’m renting from a buyer?
In today’s housing market where buyers are in many cases compromising a lot to land the home of their dreams — faced with a sellers’ market and fierce competition — a situation could come up where there may be a rent-back period between buyers and sellers. The buyer will most often rent the property back to the sellers after closing. In this case, both the would-be buyer and the seller will need insurance policies — the seller for a rental policy and the buyer a landlord policy. With these safety measures in place, everyone will be covered if something happens to the home during the rental period.
A home is an investment and you want to make sure it’s covered with insurance, while getting insurance on a home that you don’t own can add some extra steps, it’s not impossible.
