Doing the 'Next Right Thing': Owner Occupancy

In her book Traveling Mercies, Anne Lamont writes, “ I took a long deep breath and wondered as usual, where to start. You start where you are, is the secret of life. You do the next right thing you can see. Then the next.”

Consider this: your Homeowner’s customer of 30 years calls you and advises she is moving into an assisted living facility and the house will be sold sometime in the future, but for now her nephew will be living in the house and she will continue to pay the premium. Or your insured’s son calls and asks that the billing address on the policy be changed to his address. He is taking over his mother’s affairs because she is moving into a nursing home. 

Because the policy will be kept current with payments, you may think all is well and simply document your file. Or you may make a mental note to visit this later when you have more time. However, you have just been advised the dwelling will no longer be owner occupied, and you — an agent with superior insurance knowledge — need to do the “next right thing. “

In a Homeowner’s policy, both the dwelling and owner occupation are important to the insurer — the policy insures against liability exposures as well as property. Also, and for obvious reasons, a home no longer occupied by the owner constitutes a material increase in the risk.  Finally, Homeowner’s policies include an endorsement regarding owner occupancy which states: “we” do not pay for a loss that occurs more than 30 days after the date the “insured premises” is no longer “your” permanent place of residence.

Homeowner’s claims involving dwellings that are no longer owner occupied have increased and without exception cause serious insurance coverage problems for all involved (the insurer, the agent, and most importantly, the insured).  As in most coverage disputes, the agent’s position is difficult and the insured more often than not will accuse the agent of knowing and not acting.

Coverage issues may be avoided by verifying owner residency: 1) during renewal check-ups, and 2) upon receiving a request to change the policy address to an address other than the described premises. When an agent has timely knowledge of a change in occupancy, future problems such as these may be avoided by doing the ‘next right thing’.  If you find yourself dealing with a non-owner-occupied situation, please promptly notify the insurance carrier and obtain guidance from an underwriter on correcting the insurance coverage.