Friday, March 18, 2011

Buying a home? Do you have coverage? Are you sure?

I got a question today from one of the real estate professionals I work with. The question they asked was, " With lenders wanting insurance coverage before they will prepare loan documents, does the client have coverage even though they do not own the property yet?".

The policy is in force the day it is bound. But the buyer does not own the house yet and the policy will not be paid for until escrow closes.  The first thing an insurance adjuster will ask for is proof that the client owns the home at the time of a claim, especially if they just moved in. Usually this is in the form of closing statements from escrow or a copy of the grant deed. If they don't own it, they don't have an insurable interest. You would not pay for something you don't own, would you? We'll neither will your insurance. The buyer would not have any coverage until they own it.

If you are buying a home, don't plan on "just putting a few things in the garage" until after you close escrow and you own the home. The sellers insurance will not cover your stuff, the policy you are buying will not cover you yet since you do not have title to the property. Don't start painting or do anything to the house. You don't own it yet! If anything happens and you file a claim, the policy could be canceled by the carrier and they may not provide coverage.

 Keep your insurance agent in the loop so they know if you are closing escrow early or later. They can often move policy dates forward or re-write the policy to reflect the correct dates.