Ask An Advisor - Insurance Edition

Royal Legal Solutions Insurance Manager Aaron Porter, a seasoned expert, hosted the highly informative Ask An Advisor-themed group mentoring session. 

His presence added immense value as he enthusiastically engaged in a dynamic Q&A session, providing invaluable insights and expertise on various insurance topics.

If Fire Or Flood Destroys My House, Does The Insurance Company Pay The Homeowner And The Bank?

When a fire or flood destroys a house, the way the insurance company pays out depends on the specific terms of the homeowner's insurance policy:

  • Insurers typically pay the policy limits if a total loss occurs.
  • Insurance does not typically pay off a mortgage if a house is destroyed by fire or any other disaster unless specified in the insurance policy.

How Do I File An Insurance On Behalf Of A Deceased Person?

Filing a property claim on behalf of a deceased person is a procedure that requires specific steps. Here's a general guideline:

  1. Appointment as Administrator: If the deceased didn't leave a will, you'd most likely need to be appointed as the administrator of their estate to handle their affairs, including filing insurance claims.
  2. Obtain the Death Certificate: You will need a copy of the death certificate, which verifies the person's death and your authorization to act on their behalf.
  3. Identify the Insurance Policy: Locate the insurance policy held by the deceased individual. It could be a homeowner's insurance policy or another type of property insurance.
  4. Contact the Insurance Company: Inform the insurance company about the death immediately. Provide them with a copy of the death certificate and other necessary documents.
  5. File the Claim: Follow the insurance company's process for filing a claim, which usually involves completing a claim form and providing any required documentation.
  6. Handle the Payout: Once the claim is approved, the payout may go directly to the estate to cover any debts. 

The Nuances Of Flood Coverage

Most standard homeowner policies do not cover flood damage. A homeowner must usually purchase separate flood insurance to cover flood-related damages if they live in a flood-prone area.

The National Flood Insurance Program (NFIP) offers insurance to any homeowner, regardless of flood risk. 

  • This insurance offers up to $250,000 in building coverage and $100,000 in contents coverage. 
  • Homeowners in certain flood zones aren't legally required to purchase flood insurance. 

It's worth considering purchasing flood insurance if you live in a flood plain, near a river, or on the coast.

What Happens If My Homeowner Insurance Lapses?

If your insurance lapses, you're uninsured for that period:

  • It exposes you to significant financial risk if something happens to your home during the lapse. 
  • You won't be able to claim any damage that occurred during this time.

A lapse in coverage can happen due to the following:

  • non-payment of premiums
  • non-renewal of the policy
  • if the insurance company declines to renew your coverage

Many insurers typically have a grace period, usually up to 30 days, from the date of the lapse due to a missed payment. If your insurance lapses, you'll lose liability coverage. You'd be financially responsible for their medical bills if anyone gets injured on your property.

Will I Be Penalized If I Resume Insurance Later?

If you paid your house off and you decide to discontinue your home insurance, there won't be any legal penalties, but it's risky.

  • You're 100% liable: Without homeowners insurance, you'll be financially responsible for any damage to your property or personal liability issues that might arise--anything from fire damage to a visitor injured on your property.
  • It's expensive: you may face higher premiums if you decide to resume your insurance later. Insurance companies often view lapses in coverage as risky, which can result in increased costs for you. Some insurers might even refuse to insure previously uninsured properties in extreme cases.
  • You may be uninsurable: If your property has been without coverage for a significant period, the insurance company may require an inspection before issuing a new policy. They could decline to issue the policy if they find undisclosed potential risks or hazards, such as a cracked foundation or a roof needing repair.

Key Takeaways

  • Homeowner's insurance policies usually pay both the homeowner and mortgage lender for fire or flood damage, but they don't pay off the mortgage unless stated in the policy.
  • To file an insurance claim for a deceased person, you must be appointed as an administrator, obtain a death certificate, identify the insurance policy, contact the insurance company, file the claim, and handle the payout.

Last Updated: 
August 16, 2023

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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