It is important to have good communication between homeowners and their insurance agents. When there is a change in a homeowner's situation, the homeowner needs to let their insurance agent know, so the agent can inform them if changes to their insurance policy are necessary.
Gary Peralta, an insurance agent with Farmers Insurance and an affiliate member of the Silicon Valley Association of Realtors, said many a homeowner can get a surprise when they find out their insurance company will not accept their claim. Take the case of seller rent backs after closing. According to Peralta, this situation can prove very expensive, depending on the circumstance and what type of insurance each party has.
If a seller needs to rent back after closing, in addition to executing a formal occupancy agreement, the seller should obtain a renters insurance policy. The seller cannot just maintain their homeowner insurance policy because they no longer own the home. In the event of a claim, their insurance company may refuse to pay the claim.
A seller who needs to rent back after closing should, instead, obtain a renter policy to cover personal belongings, in case something should happen. The buyer, on the other hand, should obtain a landlord policy and convert it to a homeowner policy once the buyer occupies the home.
If a homeowner plans to leave their home vacant for a long period of time, the owner should contact their insurance agent and find out what type of coverage they would need in case of vandalism, liability or fire. Some homeowner insurance policies will not cover these risks because the owner did not occupy the home.
"A typical homeowner's policy will not cover theft, vandalism or liability on a vacant home. Let your insurance agent know if your home is vacant," said Peralta.
Peralta suggested Realtors should have a game plan before the question of flood insurance arises in a transaction. Have sources in place and establish connections with an insurance agent and land surveyor. This way, Realtors will be organized and have contacts in place should such a transaction arise in the future.
With rents sky high, cities are becoming more flexible with rules regarding accessory dwelling units. Many homeowners are also seeing financial opportunities in renting rooms in their home.
In the case of separate structures, once the accessory dwelling unit (ADU) is rented out, the homeowner would need to have a separate insurance policy. By renting out an ADU, even if it is within the same property, the homeowner would be taking on a different form of liability.
In the case of renting a room in a home, the renter must have their own renter's insurance policy. The homeowner must inform their insurance agent that they are renting a room or rooms in their home. Some insurance companies may or may not cover the homeowner, depending on the circumstances and number of renters in the home.
Peralta also said homeowners need to be diligent in caring for their roof. Not all roof leaks are covered by insurance in California, especially if the leak is due to lack of maintenance, or if the roof is just worn out. Homeowners need to properly maintain their roof.
"If your roof needs to be replaced, do so sooner than later," said Peralta.
Insurance needs can vary substantially and this is why it is very important to discuss the situation with your agent. Your can help you understand the risks involved in each situation, said Peralta.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.