Dear Mr. Premack: We are applying for a reverse mortgage. They require the insurance be made out in their name. What happens if we have a loss such as a fire? Who gets the money to rebuild the house? – BAE

When you agree to a reverse mortgage, the lender turns money over to you in exchange for a promise to repay the debt with interest. The loan is secured by a lien against your home. If your home burns down the lender’s security is impaired, so they make you sign an agreement which includes terms about your homeowner insurance.

For instance, one reverse mortgage requires that the home be insured against fire and against extended risks like flooding. The extended coverage may increase the annual cost of your insurance policy. The agreement also gives the lender power to reject the insurance company you select, and if you fail to pay for your insurance it gives the lender power to insure your home and charge you for it.

If the house burns down or is otherwise damaged, the insurance proceeds are generally used to rebuild or restore the home. However, if the lender decides that its risks are not adequately covered (that is, repairs cannot return the house to its prior condition) then the lender can claim the insurance money as repayment against the loan balance.

If they do so, you won’t have the insurance proceeds with which to rebuild your house. From the lender’s perspective, you have come out even because you have the money they lent to you. In reality, you have likely spent that money for the reasons that caused you to seek the loan in the first place. As a consequence, you may not have enough money to replace the damaged home with one of comparable size or location.

In addition to higher homeowner insurance costs, when you take a reverse mortgage you will likely be required to purchase mortgage insurance. Ninety percent of all reverse mortgages are guaranteed by the federal government’s Home Equity Conversion Mortgage program, and it requires mortgage insurance that costs you 2% of the loan amount up front and a premium of 0.5% of the loan amount annually.

Dear Mr. Premack: I have three children from my first marriage, and am in a common law second marriage. If I die without a Will, who would be the legal beneficiaries of my estate? Does Texas law give any rights to my common-law wife? – BAY

When someone dies without a Will, children from the first marriage are the primary heirs-at-law. The second wife keeps her half of any community property and has the right to continue to occupy the homestead. Your common law wife may have to prove she was in fact married to you.

I have given these answers in past columns with a lot more detail. I invite anyone who would like specific information on these issues – or on hundreds of other Elder Law topics - to visit my website at www.Premack.com. There is free access to the archive of this column dating back to 1989. The website includes a search engine, a chronological list of past columns, a virtual law office and legal articles I have written for other forums.