You and your siblings deal with the excruciating decision to place your mother into a long-term care facility as she can no longer take care of herself due to either physical, medical or mental capacity issues.
Her home sits until the family can agree on a course of action regarding it. Whether they decide to rent it out, have a family member move into it as their primary residence, or you decide to divide and then sell the remaining contents of the home and put it up for sale; these actions VOID the homeowner’s insurance that mom has on the property.
Michigan homeowner’s insurance was never created to have the residence occupied by anyone ‘other than’ the one who owned the home. The minute it becomes ‘non-owner’ occupied, there is a problem with the insurance that must be addressed; but that many times is forgotten or simply thought not to be a big deal.
As an agent who has sold insurance in Northern Michigan for almost 30 years, (let’s agree I started when I was 10; not really but I hate aging myself), I saw many companies early on in my career, that would investigate after a house fire or a claim of liability and find out that the homeowner no longer lived in the home. They would simply refigure the insurance premium for a non-owner occupied (rental) home policy and charge the insured the difference, but would also pay the claim.
You could say those were the good ole’ days because that just doesn’t happen anymore.
Whether it’s a claim of liability where someone is injured on premises, a burglary, or a fire, insurance companies are DENYING claims when the homeowner/named insured is NOT using the home as their residence.
This started becoming a major issue around 2008 when the stock market crashed. We saw many instances where people who could no longer afford their mortgage, move in with relatives and rent out their home for their mortgage payment. They didn’t alert the mortgage company or their insurance agent.
Here in Traverse City, this very scenario happened. The homeowner had insured the home for over 10 years with the same insurance agency, but the owner decided to rent it out and did not call the agency to advise. When the home suffered a substantial fire loss and the company found out it was no longer being used as a ‘primary residence’ for the named insured, all coverage was denied. ALL! That means no money for the clean-up, fire department call, contents or building. The clients did sue the insurance company involved in this incident, and they lost. Their insurance policy CLEARLY outlined it was insuring the residence premises where ‘you’ reside and ‘you’ are defined as the Named Insured (policy wording varies).
Even when you empty the home and don’t let anyone live there, but list it with a realtor, or just leave it sit until family members can agree, ALL Michigan home insurance policy have a ‘Vacancy’ clause that needs to be consulted. Some say that once the home has been unoccupied for more than 60 days, all coverage is void.
We are more than happy to assist you with such important decisions, and hope this article helps alert more people to the issue of vacant and non-owner-occupied homes and how they affect home insurance policies. As always, we are simply a visit, phone call or email away.