Ineligible Risk Rating from Insurance Companies

[Yao Thompson]

I am in the process of purchasing a rental property and my insurance broker came back and said that multiple insurance carriers denied the application because the property is classified as an "Ineligible Risk" we were told that their is 1 Insurance carrier that will insure but this will require a pre-insurance inspection. Has this type of situation occurred with any one else if so what advice do you have; should this be a deterrent from closing on this property or does it give me more room for negotiation in purchase price?

[John Mocker]

Yao,

I have not heard of a property being classified a Ineligible.  Generally, each company has to file their Underwriting guidelines with the Insurance Dept. in that state.  Properties that do not meet the company's guidelines would be Ineligible for that company only.  Another company may have filed different guidelines and that property is eligible for them.  

I could be that some factor or combinations of factors of you property are causing the issue.  For example, we write Personal Insurance with 50+ companies.  Of those, only one that I am aware of, will allow for any Knob & Tube or Aluminum wiring.  Flat roofs, Asbestos Siding, underground tanks, etc. could also lead to a lot of companies guidelines making it ineligible.  

The other possibility is the loss history of the property.  Even though you did not own it, if there were multiple claims in the past 5 years, that could be a factor as well.