Should You Keep Your Inherited House? How to Assess the Costs

If you’re like most people who’ve just inherited a house, you’re probably struggling to decide what to do with the asset. Given the dismal state of the current housing market, it may be tempting to hold onto the property for a few years to give house prices a chance to recover, while potentially taking advantage of escalating rent prices in the meantime. Before you can justify taking this approach, however, you’ll need to have a clear idea of what it will cost to keep the home. Here are the items you should include in your calculation:

Unit Owner Insurance: Why the HOA’s policy is not sufficient.

By Yesenia Castro, License #0G54415, Robert W. Little Insurance Agency, Inc

 

One of the most regrettable moments in a person’s life is when they realize their insurance coverage is not sufficient.  One situation that often leads to this moment is those individual unit owners who believe that their master policy covers all of their potential personal losses.  

 

In order to ensure this moment does not happen, each individual should purchase an individual unit owners policy, also known as an HO-6 policy.  

 

There are five major coverages usually not covered by the HOA’s master policy that the individual unit owner should have included on their individual policy:

 

1. Building property:  Even if the HOA’s master policy does cover building property (also known as betterments and improvements or additions and alterations), the individual unit owner should carry building property coverage for two reasons.  One would be to cover the HOA’s deductible, especially if the CC&R’s of the HOA dictate that the individual unit owner is responsible to cover the deductible before the HOA’s policy applies.  Second, in the event of a total loss and the master policy coverage was exhausted, the individual unit owner could call on their individual policy to cover the betterments and improvements if the HOA’s policy had no coverage to extend.  
2. Personal property or Contents:  Every item that is not tied down or permanently attached to the unit that is owned by the individual unit owner is personal property.  Examples of this could include furniture, clothes, dishes, etc.  The amount of coverage should equal the replacement value of the items.  The replacement value is the value of what it would cost to buy all the items brand new.  It is important that the individual ask their insurance agent/company that there is replacement cost coverage on their personal property coverage.  The individual should also be aware of special limits for certain categories of personal property such as jewelry, collections and business property.  Finally, it is important to also make sure the unit owner keeps an inventory of the replacement cost of each and every item in their home. 
3. Loss of use or additional living expense coverage:   This coverage covers all the additional expenses an individual would incur if they could not occupy their unit due to a covered loss (i.e a fire).  This can include the costs of renting a place while the condo/town home is being rebuilt.  Some companies give dollar amount, others say the cost is covered up to a certain amount of months.  The best coverage typically available gives no dollar cap and covers up to 24 months additional living expense following the covered loss. 
4. Personal liability- The HOA’s master policy liability typically only covers unit owners liability in regards to the individuals unit owners liability for maintenance and repair of the HOA common area.  The liability of the individual unit owner policy typically gives coverage for bodily injury and property damage liability not only for the premises, but worldwide coverage, as long as the individual is not driving a motorized vehicle.  
5. Loss Assessment-  In the event that the HOA has a total coverage loss (such as fire), the HOA may need to assess the individual unit owner for their proportionate share of funds needed if the master policy coverage limits are exhausted.   

 

It should be noted that typically the individual policy will not cover earthquake damage.  The unit owner can purchase an individual earthquake policy or check with their insurance agent/company if the coverage can be added via endorsement. 

 

All coverages should be reviewed with the individual unit owner’s agent or company for the suitability of coverage and level of coverage.