Homeowners understand the need for home insurance to protect them from the expense of damage due to natural causes, fire, or theft, and to provide liability coverage for service professionals and other visitors to their home. Co-owners of a vacation home need coverage for the same reasons, but they need to ensure that they obtain coverage that fits their unique ownership setup.
If the ownership group forms as an LLC, the insurance must be in the name of the LLC not the owners’ names. The insurance must be paid for by the LLC, and all claims must be made by the LLC. The insurance will cover the property owned by the LLC, but not the personal property of the owners.
If the owners use another ownership structure, they must ensure that all the owners are on the home’s policy and that the insurance is maintained and up to date. The best time to address this is as the group develops its ownership agreement.
Another part of the ownership agreement is what happens if a member dies. Each member should have a life insurance policy to cover their share of ongoing costs for a period of time so that the rest of the group does not lose the home.
Insurance may seem complicated, but with the right guidance, co-ownership groups can find the coverage that fits their needs and alleviates stress, allowing everyone to fully enjoy their home away from home.
