With the housing market still on fire, home buyers are allowing the sellers to stay in their homes, after it has been sold for a few days up to a few months. Have you ever wondered how insurance would work in this situation?
If you are the buyer, to close on your new home, the mortgage company requires you to have an owner occupied home insurance policy. However, if you are renting back the home to the previous owners, your new policy may not cover you the way you want it to, in the event of a claim. Most insurance companies understand that a home may be vacant in the transition from one owner to the next for a short period of time (up to 30 days is typically acceptable). What they may not expect is, that you are renting your new home to someone else instead of moving in.
Most insurance companies want you to have a landlord policy, if you are renting a home to someone else. The reason for this is simple: the policy language is different and better protects you as a landlord. What you may not be aware of is, if you rent your home to another party, while having owner occupied home insurance, you may not have coverage in the event of a claim. Each company will handle this differently and a claims adjuster will determine coverage at the time of a loss.
So, how do you protect yourself?
Double check your coverage on your new home insurance policy. If there is no coverage for a rent-back or landlord-type situation, then you should acquire a separate landlord policy. Even if it is for one or two months, you could always cancel it (pro-rated refund most of the time). Also, by having a second policy, you may not lose sleep at night knowing you are fully covered, just in case something were to happen.
We hope that nothing ever happens in these situations and please call us if you have any questions. We are here for you, any time.
