Current tenants running assisted living business out of duplex

[Sarah McCluskey]

I was looking at putting an offer in on a duplex, but am getting mixed information on the insurance needed - that could make or break the deal.

The current tenants are running an assisted living business out of hte duplex. The nurses stay upstairs during their 24 hour shifts, and the 3 bedrooms on the first floor unit are used for assisted living patients.

They have been doing this for 304 year and their rent is currently below market rate. Current landlord has owned hte property for 40 years and shrugged his shoulders about extra insurance. He said he never told his insurance company about the business they were running.

I called my contact at State Farm and they told me no extra insurance is needed, and that the business is responsible for holding insurance.

I called another insurance contact, and they said that assisted living facilities have extremely high risk, therefore high insurance premiums that they have to run through as commercial. And that if an accident happened, they would first sue the business, then sue the homeowner, and that their business insurance would not cover me. To insure this, he quoted $10k a year. He wasn't trying to sell me on it, he was actually trying to tell me to walk away from the deal and the risk.

Obviously this is a huge discrepancy in what I'm being told and the cost that could make or break this deal.

Does anyone have experience in this area?