I have had my Ins Agent pose the exact same question to my Ins carrier… Zurich, called Builders Risk Plan, that I use for vacant houses. They do allow me to add property immediately after buying it at sheriff sale, knowing that I do not hold title to the property. The agent’s opinion is that if there was a total loss, they would limit coverage to the amount of cash invested in the deal. Of course I would be obligated beyond the initial deposit, potentially, and since the company has answered affirmatively on the coverage question, we would simply have a p*ssing contest over what their limit of coverage was…
This is all about insurable interest… Once you make a non-refundable deposit you have an insurable interest in the property. The company must understand that this deposit is NOT an earnest money deposit but a non-refundable deposit, with recourse. This is not a one-size-fits-all question or problem, but a specialized commercial ins problem. Make sure you have representation that is up to that task…
Does anyone have a source to insure a property that you don’t yet own? I have bought a few at the auction; however, can’t get insured until I settle a few days - a week or so later. Although the risk is small that there is a huge loss on the property, my deposit is at risk until settlement. My insurance company won’t cover my interest in the property until I’m on Title.
Re: Insurance for Foreclosure - Posted by Natalie-VA
Posted by Natalie-VA on June 07, 2007 at 16:12:39:
I’ll second what JT said. I also add these to my Zurich policy before I actually take title. My agent says we’re insured. I also have a contract that states that the risk of loss passes to me on auction day, not on settlement day.
I normally don’t rely on what an agent says for something as important as this. You may want to get it in writing. Keep in mind that the agent’s job is to bring business in. The claims adjuster will work on trying not to pay you.
Your title agent should be able to issue a commitment for coverage based upon what is known in public record prior to your purchase. They are stating that once you obtain title, they will issue a policy… Not sure what else you would need besides that…?
Risking the deposit is just one of the risks of purchasing at sheriff sale. It is best to know your legal rights as a successful bidder, prior to taking title, in the event that something goes awry. There are remedies for some events, and none for others… again just the risk of the landscape.