The change of insurance with “subject to” transaction

[Jeff Silver]

I plan on purchasing a property subject to The existing financing which is a VA loan. My question is around the mechanics of changing the insurance. I'm talking through this… Since the lender will be aware of the title change the existing insurance in the sellers name will no longer be valid in which I will need to have a policy in place under the LLC I'm buying under.

Do I just get a homeowners insurance policy or landlord policy? Then notify the lender with proof of coverage? Or is there a better strategy around this entirely?

I am obviously also trying to avoid them enforcing the due on sale clause as best as can be done.

Thank you in advance!

[Ryan Ingram]

Hey @Jeff Silver,

I think that is a great question, and something that we definitely don't come across often. 

Yes, you'll definitely want to purchase a dwelling fire or "landlord" policy. A homeowners policy is only necessary if you are planning on occupying the property. 

From an insurance perspective, the name generally needs to match the name that appears on the deed. So, you're right in changing it. However, the lenders documents will still have the previous owner's name. Right? 

So, if I were you, I would take out a "landlord" policy in your name. And then list the lender as the mortgagee/loss payee, and the previous owner as an additional interest. 

You want to be careful about who you list on your policies as "additional insured." When you list someone as additional insured, they have every right to the policy and coverage, just like you. So, they could file claims and be covered for their actions under your policy. 

Not ideal....

But, definitely consult a local independent insurance agent and let them walk you through...that knows the full situation.