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Bill would extend short-term insurance coverage after transfer-on-death deed to avoid coverage gaps
Summary
A bill would require insurers to treat a beneficiary named on a recorded transfer-on-death deed as the named insured for a short transition period after the owner ies, preventing coverage lapses while beneficiaries arrange new insurance; sponsors proposed a 45-day limit or the policy's remaining term, whichever is shorter.
Representative Steve Fitzpatrick told the committee House Bill 464 is intended to close a coverage gap that can occur when a property owner records a transfer-on-death (TOD) deed: when the owner dies, title transfers to the named beneficiary, and some insurers treat the policy as ended because the named insured no longer has an insurable interest.
"The idea here is that the homeowner has paid a premium," Fitzpatrick said. "All that's happened is you've had a change in who owns it. We should at least let the insurance carry over for a minimum amount of time so that if there is a loss, that loss is covered." The bill would automatically extend coverage to the designated beneficiary for the remainder of the current policy term or for 45 days after death, whichever is shorter, unless the beneficiary disclaims the interest.
Deputy Insurance Commissioner Frank Cote and Helena attorney Corina Wilmot, who helped draft the measure with estate-planning lawyers, said the change would fix three practical problems: (1) beneficiaries often do not know they hold title immediately; (2) estates sometimes cannot get a personal representative appointed quickly to cancel a policy; and (3) coverage lapses can leave owners or estates exposed to losses that produce difficult claims and unrecoverable premium refunds.
Committee members probed the 45-day period. Fitzpatrick said the intent is to balance estate-administration realities against insurers' interest in avoiding coverage for unpaid premiums; Cote added that the bill is drafted so it will not force insurers to cover risks where a premium had already lapsed before death.
Ending: Supporters said the bill would protect beneficiaries and estates from unintended losses and simplify administration; the committee advanced the measure with a technical amendment and passed the bill as amended in executive action.
