Home Sweet Home – Protecting Your Greatest Investment
For most Americans the purchase of a home is the greatest investment they will make. With the recent severe weather, including tornadoes and hurricanes, many people have been reminded of the importance of insuring their homes and protecting them from nature.
There are many other issues, however, that people should consider when getting their house in order. Many challenges that arise from home ownership are easily preventable, but diligence is necessary.
First and foremost, understand your mortgage. After the foreclosure crisis hit a few years ago, many people learned this lesson the hard way. Mortgages are either open or closed. An open mortgage can be paid off at any time; a closed mortgage cannot. What is the interest rate on your mortgage? Is it possible that it may rise in the future? Think long and hard about obtaining a reverse mortgage. While reverse mortgages may be appropriate in some situations, they can be complicated transactions and should not be used without legal advice.
Second, review your insurance policies frequently. If a home is not properly insured, damage may not be covered after a loss. Even when proper coverage is in place, some acts of nature may not be covered by a policy. If you live in a flood zone, then you should have a flood insurance policy. If you have built a free-standing addition to your home, then it may not be insured by your old policy. Homeowner’s insurance policies often do not cover expensive jewelry or other personal items that may merit individual policies.
Third, always read your policy thoroughly before calling the insurance company after suffering a loss. Be especially aggressive if you see any kind of mold in your home. Some kinds of mold are covered by homeowner’s insurance and others are not. Because there are so many different kinds of water damage (rain, floods, tidal erosion, groundwater, frozen pipes, sewage, septic, etc.) insurance companies often dispute a claim involving mold, or at least dramatically delay the payment of the claim by requesting laborious documentation. Avoid this situation by fighting mold early and often.
Ask the local fire department to conduct a fire safety inspection of your home every few years. Finding and fixing potential fire hazards could save not just your life, but it could also prevent your insurance company from claiming that your own negligence caused a fire.
Also be aware that if you call the insurance company with a question about coverage for minor damage, the company may flag your file, and if you do file a claim for more serious damage in the next year or two, then the company may consider you a high risk and drop your coverage.
Finally, make sure you know how your home is titled and the tax basis of your home. Homes can be titled in tenancy by the entirety, joint tenancy with right of survivorship, fee simple, or tenancy in common. If a home is not properly titled, significant problems can occur when one attempts to sell it to a new owner or devise the property in a will. Additionally, whenever you improve or renovate your home, be sure to keep all receipts, because this will increase your tax basis in the home in case you sell it during your lifetime.
The attorneys at The Estate Planning & Elder Law Firm can assist clients with their estate, financial, insurance, long-term care, veterans’ benefits, and special needs planning issues.
Please call Ariba for a free portfolio review. 1-800-808-7488
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