Insurance cancellation on apartment complex

Raleigh, North Carolina
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Insurance cancellation on apartment complex

Victor Hong
Member since 2024 · 13 posts · 6 votes

What if no other insurer will provide a new policy, but my lender requires full ongoing coverage, and would treat a naked situation as a default, meaning immediate loan repayment or foreclosure?  

An upcoming refinancing maturity, too, can add to worries.


Has this happened to investors here?   Would it be better to say nothing?   Thank you.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    2y

    There is always insurance out there....it just may be at a price that's drastically more expensive than you think you should be paying.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Victor Hong

    Even if you have had multiple claims, the state will provide insurance but the cost is going to be astronomical

    Why can you not get insurance ?

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  • Victor Hong
    OP
    Member since 2024 · 13 posts · 6 votes
    2y
    Quote from @Chris Seveney:

    @Victor Hong

    Even if you have had multiple claims, the state will provide insurance but the cost is going to be astronomical

    Why can you not get insurance ?


    Recent repeat flooding, even thought outside of FEMA flood zone.

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  • John Mocker
    Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
    2y

    Victor,

    Many Mortgage companies have a clause that lets them place the coverage (called Forced Place in the industry) if you do not show proof of coverage.  Even if that is a possibility, I would continue looking for coverage for two reasons:

    1. the Mortgage company generally only buys what is needed to coverage their interest in the property (not your equity you've built up)

    2. Costs are generally 2-3 times what you could get on your own.

    A good agent will need more info to be able to help you:

    1. Is the Property & Liability (Package or BOP) coverage being cancelled or just the Flood

    2. what were the dates, type of damage, and amounts paid on the claims

    3. what has been done to mitigate the chance of this happening again

    4. Have there been other, non-flood related claims in the past 5 years (if you can find out even farther back that would be helpful

    5. Any other possitive factors

      - stable tenant base

      - alarm systems

      - regular checks on the property

      - no pets

      - Lead safe certification

      - newer roof, plumbing, electric, etc..

    Anything to balance off the losses

    Be prepared that it may end up in a non-standard (surplus lines) market for a couple of years.

    If you did not have flood coverage before, see if they will continue the current policy if you get Flood coverage and increase the property coverage deductible. 

    PM me if you have any questsions on the above.  

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  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    2y

    Our experience in these situations is that the Lender will find insurance at your expense. They do not want to accelerate the loan for insurance, especially if you are paying the mortgage. 

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  • Victor Hong
    OP
    Member since 2024 · 13 posts · 6 votes
    2y

    Lender indicates that force-placed insurance company is retreating.

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