Is It Possible to Get Homeowners Insurance on a Home You Don’t Own? Find Out!

Did your parents pay off the mortgage on your childhood home years ago? While they’ve likely kept up with property taxes, you could nonetheless have some concerns about homeowners insurance. Or maybe you’re inheriting a great-aunt’s house that’s been sitting empty for years. Can you get homeowners insurance on it?

There are times when you’d need to insure a home that you don’t own yet, or is in a probate or trust state when you insure it. But getting homeowners insurance on a home you don’t own can be tricky, and not everyone can do it. Here’s how to know whether it’s a good idea and how to go about it.

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Can I get homeowners insurance on a home I don’t own?

An insurance agent might let you take out an insurance policy for your parent’s house, or another relative’s home, but you won’t be able to make yourself the beneficiary or receive any payouts if something happens to the house.

If there’s hail damage to the roof, a forest fire destroys a garage, or you need to file a claim for any reason, you won’t be getting the payout. The money would go to the current homeowner.

How can I determine if a house has insurance on it already?

First, try to find out if the house has a mortgage on it.

Mortgage lenders require homeowners to carry insurance on any property that hasn’t been fully paid off, so if there’s a mortgage on the house, then it already has insurance (and if not, the mortgage lender is doing something to remedy the situation!).

If the property is a condo or co-op, the condo association or co-op board will have the same homeowners insurance requirements.

Lenders check with the insurance agent or homeowner periodically to verify that coverage is still active. If they’re not satisfied with the response, or if the homeowner doesn’t send proof of coverage fast enough, then the homeowner can be considered in violation of the mortgage loan’s conditions, and the lender may impose fines onto the homeowner — and, in certain cases, even foreclose on the house.

If the house is paid off, it might or might not have insurance on it — there’s no real way to know. You could ask your grandparents (or the relevant relative in question), but they’re under no obligation to tell you. That said, most homeowners would want to protect their big investment from a total loss in the event of a disaster.

What if I’m inheriting a house?

When you inherit a home, you’re now a homeowner without the benefit of a home inspection, and depending on how well your relative maintained the home, you could be in for a few surprises! Make sure that insurance isn’t one of them.

Talk to your agent and a lawyer — the former homeowner’s insurance policy won’t apply anymore, and you’ll want to secure a new policy to cover the home.

If you don’t plan to live in the house but will be keeping it, then you may need to get a special policy called vacant and unoccupied home insurance. Some companies have a separate policy, while others offer this protection as an add-on. The premiums on vacation and unoccupied homes are typically higher than for an owner-occupant. Insurance companies worry that no one would notice a burst pipe until it’s done significant damage, or that squatters could break in and vandalize a vacant home.

What if you’re going to sell? The good news is that even though the insurance will cost more if you hope to sell the house shortly, you can purchase short-term homeowners insurance policies for periods between three and six months.

You should definitely maintain a policy, even if it costs more than you’d hoped. If a potential buyer is injured during a showing, for example, you’ll want liability insurance coverage to protect your estate from a lawsuit.

What if I’m renting the house back to the seller?

In a hot seller’s market, many buyers are offering rent-back periods to sweeten the deal. With a rent-back period, sellers can continue living in the home for a few weeks or months after closing. If you own the house, but someone else is living in it, who’s responsible for the insurance?

Michael Brower, a risk advisor at American Family Insurance, says that the buyer is responsible for insuring the property after the closing.

“The seller’s insurance contract to insure the property would end when they are no longer the owner,” he explains, “as they no longer have an insurable interest in potential losses or claims.”

He advises that buyers who are offering a rent-back period require that the seller purchase a renter’s policy for the rent-back period. To further protect themselves, the buyers should purchase themselves a landlord policy that they can then transition to an appropriate homeowners policy after the sellers move out and the buyers can move in.

What happens if I try to make a claim for a policy on a house I don’t own?

There’s a difference between sitting down at the kitchen table and walking your parents through filing a homeowners insurance claim and filing a claim yourself. As long as they’re the beneficiaries and you’re just helping with paperwork, you’re fine, but you can’t file a claim and expect to receive the payout yourself.

The insurance company will want to make sure you have an insurable interest in the house — and if you don’t, you could be in legal hot water as a result; this practice is also known as insurance fraud.

What if the house is being held by a trust?

In this scenario, you might be able to take out a policy and successfully make a claim if you hold an interest in the trust or LLC. If you have an interest in a trust or LLC, then you have an interest in all real assets it owns. Some insurance companies do sell insurance policies for homes held in trust, but they may limit the coverage.

“There are mechanisms for insuring properties held in trust, but this would depend on the specific scenario,” says Brower. While coverage and options vary by insurer, at his company, “the home would need to be occupied by either the trust’s owner or beneficiary, who would be the named insured for the policy, with the trust as an additional insured.”

However, if you live in the house, homeowners insurance purchased on behalf of a trust will not protect you in the case of a liability lawsuit.

For example: Let’s say you have a guest over and make them dinner, but on the way from the kitchen to the dining room table, you trip and spill hot soup all over them. They suffer second-degree burns and sue you for emotional distress and their medical bills.

Under a typical homeowners insurance policy, liability coverage would kick in and help either pay the injured party’s bills or the legal fees. But if a trust is the only entity on your policy, you don’t have the same protection.

What if the house is in probate court?

If the house is still in probate and you’re not the legal owner yet, then the executor or someone else would be the most likely policy-holder, not you. They bear the responsibility of adequately protecting your asset.

However, if you are a named beneficiary once probate closes, then they should be willing to reassure you that a policy is in place.

What if I’m renting the house?

If you rent a house, you’re not responsible for the actual dwelling. Your landlord or the homeowner should have an insurance policy on the house itself, as well as any outbuildings, like a shed or detached garage.

However, their policy won’t protect your stuff — furniture, valuables, or a stereo — from damage. Talk to your insurance agent about a renter’s policy, which is written to protect your belongings as a renter.

If you have reason to think you need to buy an insurance policy on a home that you don’t own yet, your best bet is to talk to an experienced insurance agent. They can help you navigate the complexities of your situation and hopefully give you peace of mind.

Header Image Source: (Roger Starnes Sr / Unsplash)