Personal Insurance Ramifications of Buying or Selling a Home

If you are thinking of buying or selling a home, you are probably aware of the current conditions making this a seller’s market. Like almost every other industry, Covid rocked the real estate world, and its effects are still ongoing. The inventory of new and existing homes is down about 20% from the prior year, mortgage rates are historically low, and home prices rose 15%.

Whether you are a buyer or a seller, you should also be aware of the insurance ramifications. Some items/questions to consider include:

What coverage is provided for personal property in a storage facility?

With many insurance companies, personal property in a storage facility is covered in the same fashion as personal property located in the house, but it pays to confirm with your agent. Some companies may only provide coverage for a small percentage of personal property located in a storage facility – usually limited to 10% of your policy limit. For example, if your home insurance policy provides $200,000 of personal property coverage, you may be limited to $20,000 for property in a storage facility.

I hired someone to “stage” my house for real estate showings. Does my policy cover the furniture they brought into my house?

Before worrying about the stager’s furniture, make sure he or she provides you with a Certificate of Liability Insurance. If a prospective buyer gets hurt by the stager’s negligence, you want their policy to respond first. As far as the stager’s furniture, you will need to read the contract. Some stagers will make you responsible for damage to their property, but that doesn’t necessarily mean your homeowner’s insurance will cover their property. There may be coverage, but what if you moved out the house and asked your agent to delete coverage for personal property? If your policy limits are $0 for your own property, your limits will also be $0 for property of others.

How is my property covered when it’s in a moving van? Do I need to buy the coverage offered by the moving company?

Much like personal property in a storage facility, most insurance companies will cover personal property in moving van the same as if it were in your home. Your deductible would apply to covered causes of loss, but the same coverage exclusions or limitations would apply. For example, many home insurance policies exclude coverage for breakage of fragile articles, so unpacking a box of broken china would not be covered. Moving companies offer their own insurance at extra cost, but it would be prudent to read the contract before buying the coverage.

The seller disclosed a loss to their home that was paid by their insurance company. Should I be concerned?

From an insurance perspective, losses that occurred to the home prior to your purchase could have an adverse effect on the cost or availability of coverage. When your agent seeks quotes, the insurance companies secure CLUE (Comprehensive Loss Underwriting Exchange) reports on the property and the person buying the property. These reports list claims paid by other insurance companies over a three-to-five-year period and include the date of loss, the type of loss, and the total amount paid. One minor claim a few years ago may not pose a problem, but a number of similar claims could be a problem. For example, if there were three sewer back-up claims in five years, your insurance company won’t want to be paying for claim number four and may decline to quote. If you have a property in mind, contact your agent for a quote before you make an offer. You may find that the history of your dream home will come back to haunt you.

I’m planning to renovate my home before I put it on the market. Does this affect my home insurance coverage?

It could, but it depends on the scope of the project. Many policies include a provision that says renovations over a certain dollar threshold (usually $10,000) must be disclosed prior to the beginning of the project. If there’s a loss and the work wasn’t disclosed, there’s usually a coverage penalty in the form of a higher deductible. For example, your deductible might increase from $1,000 to 5% of the replacement cost on your home. On a $400,000 home, this means your deductible is now $20,000 instead of $1,000.

I’m planning to renovate my new home before I move in. Does this affect my home insurance coverage?

Yes. Much like the example above, it depends on the scope of the project. If you are getting new paint and carpet before you move in, it’s probably not an issue, but gutting the kitchen and bathrooms before you move in is a different story. Call your agent and let him or her know of your plans. There is no provision in the home insurance policy that says the agent’s failure to ask about renovations gives you a free pass at the time of loss.

Would you be concerned if you told your dentist about a sore tooth and the dentist said, “Here’s the cheapest solution I could find”? The staff at Plexus Private Client Solutions are experienced professionals in the personal insurance market. Their responsibility is to find coverage solutions and not just cost solutions. Please contact us for a consultation.

   David Miller is The Plexus Groupe’s Vice President,     Client Executive for Private Client Solutions. Miller     can be reached by calling 846-307-6141.