Homeowner's Heads' Up

Or, for estate planning purposes, put our home in a trust.

Or taken a new job in a new city three states away.

Yes, Henry, this happens all the time. What’s your point?

Well:

“A couple in Georgia bought a “fixer upper” home that was being renovated by their contractor son before their occupancy began. During this three to four month period, they stayed in an apartment. Near the end of the renovation, the house suffered a $186,000 fire loss. The insurance company denied the claim under the homeowners policy.”

All of these examples, both hypothetical and real-life, involve a little-known, and even lesser understood, insurance policy phrase “residence premises.” And just what is “resident premises?” Well, it’s typically defined as “the dwelling “where ‘you’ reside.” Okay, that seems straightforward enough, as long as we all agree on what “reside” means.

Hunh?

Well, when I leave for work in the morning on my long, arduous 6 minute commute, I may not be present in the house for the next few hours, but I still reside there. Likewise, when we take a week-long family road trip, we still technically reside there. It becomes a little fuzzier for snowbirds, but this is common enough that it’s not really an issue.

As FoIB (and P&C Guru) Bill M advises, we begin to run into problems when we look at the terms terms ‘occupancy’ and ‘ownership:’

When we assign ownership of our home to the Smith Family Trust, even though we still live (reside) there, we need to notify our insurance company, because the ownership has changed (although I would note that the risk has not, but then, one should never conflate ‘common sense’ with ‘insurance’). When we maintain ownership, but actually move out and far away, this changes the nature of the risk, and we need to – you guessed it – notify our insurance carrier, or at least have a genuine heart-to-heart with our agent about what they advise.

What one should not do is simply pretend there’s no issue or potential problem, because it’s a lot easier (and cheaper) to address it before a claim and potential lawsuit.

#WordToTheWise