Who Collects the Insurance Claim Proceeds If the Damaged Property Is Sold?

When properly documented and planned, the sale of a damaged property does not create an opening for the insurance company to escape liability from its insurance obligations. When selling your property during a pending insurance claim, policyholders can assign the claim to a new buyer or retain their right to receive insurance benefits under the policy.

In Florida, post-loss insurance claims are assignable and can be included as a part of the sale through a document known as an “Assignment of Benefits.” When selling your property with an open insurance claim, it is good practice to complete a seller’s disclosure form that clearly documents to the buyer that there is unrepaired damage to the property. Notice of an open insurance claim should also be given to the buyer because it may impact their ability to get new insurance while there is an open claim. Assigning your insurance claim to the new buyer of the property allows them to take over the claim and receive the insurance proceeds directly from the insurance carrier.

Another option policyholders have when selling their property during a pending insurance claim is to sell the property for a reduced amount. It’s crucial that the policyholder includes how much they are reducing the price of the property due to the unrepaired damage within the sale documents. This will assist in establishing a more exact estimation of the cost to repair and substantiate the basis for the reduction in proceeds. Using a seller’s disclosure form will outline that the buyer was on notice of the damages at the time of the sale and that the cost to repair was contemplated in the reduced sale price. Policyholders should have a line-item estimate to verify the cost to repair to determine the actual cash value of the damaged property.

Additionally, if your insurance company is disputing coverage of the cause of the loss, you may also want to have a licensed engineer inspect your property before the sale. Once the property is sold, the policyholder may not have the opportunity to evaluate the damages after the new buyer begins making repairs. Therefore, it is important for the policyholder to gather all the necessary documentation to prove their damages prior to selling their property.

Thought of the day: “No matter what people tell you, words and ideas can change the world.” – Robin Williams, Dead Poets Society.