It is wise to review your insurance policy

Ilyce Glink and Samuel J. Tamkin

Q: I read your column every week and I really appreciate it. However, a recent column omitted an important consideration.

A woman wrote to say she has a house that is in her name only but her husband still has the loan in his name. If the home insurance policy was taken out by the husband in his own name, it has no coverage for potential disaster losses.

A property damage insurance policy, such as a home insurance policy (as well as a personal home and auto insurance policy), will only pay proceeds if you have suffered a financial loss on the property you own. If the house was destroyed or damaged, the policy owner (probably the husband) might not be able to collect as he was not suffering from not owning the property.

The wife (if she is not a named insured) is not a party to the policy and would not be eligible for policy payments for the financial loss she has suffered. This would also apply to her personal property and if she were to suffer a liability claim for injury to others on the property or due to her personal negligence. If he and she were both named insureds, she might be able to collect some of the proceeds, but he wouldn’t.

I wish more advice columnists would point out the basic rule that all agents try to teach their insureds: “The insured named on the policy must match the ownership of the property.”

I’ve seen too many claims denied because people don’t tell their agent the true ownership interests or who actually resides in a property. This is often because owners don’t realize the extreme importance of the information or hide the property in a misguided attempt to save money on premiums.

A: Thank you for your comment. The column you refer to was actually about a woman who had divorced her husband. Her name is on the title, but only the husband’s name is on the mortgage.

You raise an important point. People sometimes overlook insurance issues. Every homeowner who has purchased a home or transferred the home to a sibling, parent, or child should make sure to update their home insurance policy. The policy must be in the owner’s name or, in your opinion, it may not provide the coverage you paid for.

Also, when people divorce and are removed from title, that person must be removed from home insurance. Let’s say a husband and wife own a house, and upon divorce, the husband becomes the sole owner of the house. The ex-wife who quit claims her property rights over her ex-husband. Ex-husband must update insurance policy to remove ex-wife’s name.

Keep in mind that if you don’t remove the ex-spouse from the insurance policy, the insurance company may make payments due for any claims to both parties listed on the insurance policy. Once that check is cut in both names, you’re faced with an awkward conversation at best, and a contentious conversation at worst, when you ask your ex-spouse to sign the check. Better to just take care of the insurance issue once there is a change of ownership on the house.

When you improve your home, you should re-evaluate the amount of insurance you purchase to ensure that the policy limits are sufficient to cover you for the loss considering the improvements. (Your insurance company can help you assess whether and by how much you need to increase your policy amount.)

When you sell your home, you must cancel the policy. There is no need to keep paying for a house that you no longer own.

Finally, and regardless of your excellent comments, we remind our readers to review their insurance coverage on their home. Recent events related to climate change and disasters remind us that a total loss can occur and that it is best to review your insurance covers before a disaster occurs.

We will never forget when friends of ours were traveling and lightning struck their house in the middle of the night. By the time firefighters arrived, the only thing left of the house was part of a wall and the chimney stack.

They were in shock, of course, when they returned home to see what was left of their home. Worse, they didn’t know if they had enough insurance coverage to rebuild. Luckily, they were told later that day by their insurance agent that they had guaranteed replacement coverage and the insurance company paid the full cost of rebuilding, replacing their furniture and getting them back. rented an apartment for the two years it took to rebuild their home.

Not everyone has guaranteed replacement coverage and some who do may find that their insurance company caps this coverage. The start of a new year is the perfect time to review your insurance policies and make sure they are up to date.

Contact Ilyce Glink and Samuel J. Tamkin through their website, BestMoneyMoves.com.

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