Probate Risk Management

When someone passes away, their home can quickly become a problem for the executors (if there is a Will) or the administrators (if there is no Will), who are referred to as personal representatives from here on.  Many insurance providers will expect to be notified within 7 days of the death (this will be in the policy as a change-of-risk condition), and may decide to give notice of cancellation or, if they continue to insure the property, to restrict the level of cover they are willing to provide.

The personal representatives have a duty of care for the property and are the only people with an insurable interest, which makes them responsible for insuring it. If they fail to do so adequately or underinsure, they are liable for any shortfall, not the estate.

Further Reading:

• Probate Property Insurance - our core cover page.
• Building insurance during probate - useful if you don't need to insure contents.
• Insuring an empty house after the owner has died - the steps to take when someone has sadly passed away.
• The Risks of Extending The Existing Insurance
• What Is The Risk Of Building Underinsurance In Probate?
• Protecting Probate Property - what insurers generally expect you to do.

Before you apply for probate, you need to make sure you are doing so on the right basis:

1. Decide whether you need legal advice or will administer the estate yourself.
2. Is there a valid Will, and if so, is it the right one?  Order a Will Search Combined from the National Will Register to be sure.
3. If there isn't a Will, consider appointing a genealogist to assess the intestacy rules regarding who inherits and the risk.  You may need to buy a report and family tree investigation in order to buy Missing Beneficiary Insurance when you have received the letters of administration from the probate registry.
4. Value the estate - get a specialist to value any property.
5. Identify outstanding liabilities.
6. Consider Inheritance Tax (and get advice from an accountant or solicitor).

Further Reading:

• Ordering a Will Search Combined from the National Will Register - to identify if there is a Will or not, or another that needs to be considered.  This is also a prerequisite for arranging Missing Will Insurance.
• Asset Searches - to researching estate financial assets like bank accounts, pensions, life insurance policies etc.
• Liability Search - to identify creditors, and will also save money when you need to arrange Section 27 Insurance
• Finding a genealogist - to assist with intestate estates.
• Find a probate solicitor
• Get help with contentious probate if there is any hint of dispute

As soon as you have received probate, the personal representatives should consider insuring their liability for third-party claims.  These risks can be around for years after distribution, such as claims:

• Following the discovery of another Will - can happen anytime in the future, so it's always a risk.
• From a creditor that was unknown at the point of distribution. Claims can be made up to 6 years after the debt is due, and for certain types of loans (like a mortgage), this can be up to 12 years.
• Beneficiary claims - 12 years from probate
• From dependents under the Inheritance (Provision for Family and Dependants) Act 1975 - 6 months from receipt of probate, but longer if the court allows

You have a liability as soon as probate is granted, so you should arrange cover as close to that date as possible to ensure you have the protection of insurance.  If a claim comes in prior to arranging cover, you are unlikely to get insurance for it.

Not sure where to start?

Most personal representatives aren't sure what cover they need.  We have written two guides to help you:

• If there is a Will (testate estate), read: What insurance should I consider for a testate estate?

• If there isn't a Will (intestate estate), read: What insurance should I consider for an intestate estate?

Our probate legal indemnity policies to consider

Probate legal indemnity cover starts from the moment you arrange the policy and runs in perpetuity, but it responds to claims arising once the estate has been distributed. So if you are going to insure, there is no real need to delay (provided there are no known issues).  Once the cover is in place, you can distribute as soon as you have your Grant.

Each of these policies can be arranged as soon as you have the Grant of Probate (where there is a Will) or Letters of Administration (if there is no Will):

• Early Distribution Insurance - Important, regardless of whether you want to distribute early or not.  Insurance against claims under the Inheritance (Provision for Family and Dependants) Act 1975. 
• Section 27 Insurance - cover for unknown creditor claims.
• Missing Will Insurance - protection against the risk of another Will being discovered.
• Missing Beneficiary Insurance - protection against the risk of a claim from a beneficiary not known about prior to distribution.