Insurance for Estates

Insurance for estates can be tricky. The first thing you need to do is notify the decedent’s insurance agent right away that the decedent has passed. There are a number of reasons for this.

If the decedent’s home was going to pass under a transfer on death designation affidavit then there is no coverage for the beneficiaries that take under that affidavit. Once the owner dies, the coverage is gone. This can be very risky because once a decedent passes the home is often vacant. A lot of people know that the home is vacant. The obituary even advertises when most the home certainly won’t be occupied for the funeral services. This can put an uninsured home at risk for a fire, theft, or vandalism.

The second reason you need to plan for insurance is if there is a Transfer on Death Designation (TOD) Affidavit for Real Estate. A lot of people like to plan with these affidavits because they have the potential to avoid probate. There is a major insurance pitfall with these affidavits. Most people don’t understand that their homeowner’s insurance policy does not extend to the beneficiaries under the TOD Affidavit. The policy covers the insured owner only. This means that if the insured owner dies on Wednesday morning and there is a fire, flood, theft, or vandalism on Wednesday night, there is no coverage. That’s right, those TOD beneficiaries will be getting out their own checkbooks to pay for the damage. That’s right. You may have avoided probate, but now you problems that probate can’t solve.

Let’s look at what would have happened if the house went through probate. It’s simple. There’s not a gap in insurance coverage. A homeowner’s insurance policy extends to the executor or administrator of the estate. So if someone breaks into the house during the funeral there is coverage for the theft.

This is why it’s important to work with a knowledgeable estate planning attorney to keep insurance for estates in place. Contact me today to begin working through the estate administration.