The Inssurance Company does't want the insured name to be my LLC?

Question

Hello Guys,

I am in a situation with my insurance for a property. My previous insurance expired and I changed the carrier and got a new insurance under my LLC name. However the mortgage company ( a local credit union TDECU) said they won't pay the insurance premium until we change the insured to be my personal name because I am the one that got the loan with them personally. When I asked if I can have both my personal name and my LLC as a co insured, they say no because this is a residential property and I can not have an LLC on the policy.

Now my agent says that if I have the policy under my name and the Deed is under the LLC, if there is a claim they won't make the payment because the insurance is not under the person/entity that is on the deed.

How should I manage this without telling the bank that I have the property under an LLC name now, which theoretically can trigger the do on sale clause or they can ask me to move the property back under my name. Let me know if anyone else had this happening and how did you handled it.

Thank you!

Melvyn Andrew · Answer

I too I'm finding out the steps in order to properly do the process of submitting offers, creating the entity and obtain insurance. My buddy who lives in Houston told me how difficult it is to be obtaining insurance lately.

https://www.wsj.com/business/insurance-home-auto-rate-increa...

The journal today had this article which was super à-propos!

should I incorporate first then get the insurance to ensure name matching ?

also, would you guys recommend creating a Texas llc?

this is also in the Houston area.

super new to real estate.

thanks for your input and advice people.

Randy Rodenhouse · Answer

You need to find another insurance company.  You said the insurance company said no because it is a residential property and therefore cannot have LLC on the policy?  That makes no sense.  I have may properties deeded in an LLC and tell the insurance to put my name and the LLC as insured.  Remember the LLC is pass through entity with you as member.  You do want the name on title and the named insured to match.

Wesley W. · Answer

I was listening to what I consider a reputable finance podcast this week, and they were saying that there were already some ways for third parties to "end around" and retrieve that information.  One need only look at some of the recent news stories in the last couple of years to see that abuse of sensitive data and personal information is rife, including inside the government.  Needless to say, anytime I am providing yet another government agency with such information, it does not instill me with much comfort that they will excerise the appropriate stewardship of that data.  To your point, if the DOS already has that information, why am I being asked to hand it over again?

V.G Jason · Answer

You are in Houston(Harris County) so your options are Sagesure, Swyfft, and maybe 1-2 others. They aren't amicable with this LLC type of stuff as additional insured. You will have to get a commercial one, unless someone locally can help with this.

Russell Brazil · Answer

If the property is owned by an LLC, both the mortgage and the insurance need to be in the LLzcs name.

Chris Seveney · Answer

@Wesley W.

Fincen has nothing to do with trying to pierce a LLC.

The intent of the law is to avoid money laundering and financial crimes.

Also note that they most likely already have 95% of this information because what is one of the first things you do when getting a LLC - you get an ein and open a bank account

So right then and there the information is out there and banks have to report suspicions activities

Fincen is not going to be used by a third party attorney in this type of case

Wesley W. · Answer

Maybe you can explain to them that your LLC is your management entity, and it exposes you to personal liability if the LLC is named in a lawsuit?

I would tread lightly with the lender, as with this climate of higher lending rates, they just might bite on a "due on sale clause" to get a better return on their money.

Alternately, you can transfer ownership back into your personal name, and then get a commercial umbrella policy.

With this new FINCen reporting rule that just went into effect, I wonder aloud how corporate veils might now be more easily pierced, thus mitigating the advantage of the entity?

Good Luck!

Owen Rosen · Answer

To be clear I don't mean as a "co-insured" but as an additional insured.  Have they given you an actual reason or underwriting guideline or are they just telling you no?  I've seen a lot of mortgage companies say things and then relent when a bit of resistance is offered.

Daniel Tanasa · Answer

I asked my mortgage company if that will work and they said I can’t have my insurance listed on the policy. Needs to be under my name only according to them.

Owen Rosen · Answer

Purchase a policy with you as the named insured and your LLC as an additional insured.