Re: sub 2 insurance - do i have this right? - Posted by Jim FL
Posted by Jim FL on September 09, 2003 at 24:02:26:
I’ll take a stab at your questions.
Over the years I have changed the way I handle insurance on sub2 deals, based on the insurance industry changing over the years.
We must learn to go with the flow a bit on this issue and work it to our advantage.
There are several schools of thought when it comes to insurance for sub2 deals.
Here are a few ways to handle it, as well as some comments from me.
Have the seller change the existing policy to a landlord, or rental dwelling policy, along with changing the insured to the trust, or trustee, and the loss payee being the lender and the trustee.
This was the way that most “Gurus” taught the method in the past, however, not all insurance companies carry non owner occupied policies, so this does not always work. As the others said, not all insurance agents will understand your request either, and educating agent after agent grows very old, very quick.
Leave the existing policy in place, and obtain a new policy of your own, seperate, and use that for claims. I personally think this is just plain silly, because paying for a policy that is not going to be used is a waste of money.
Cancel the existing policy, AFTER you obtain a new one of your own, naming the trust or trustee as the loss payee and and the lender. The insured party would be the trust or trustee.
With this method, you can use the same agent over and over, and not have to re-educate them along the way.
There is not an issue with the lender, because they see this all the time.
You can tell them about the insurance change, by sending a letter to the lender, and the power of attny from your seller.
I don’t do that, we just cancel the existing policy, and then get a new one.
The insurance company send the notice to the lender about the new policy.
As long as payments are current, and the lenders collateral is covered, the lenders simply will not care.
It is very common to place a house into a trust for estate planning reasons etc, so no red flags there either.
I use number 3 above, as oyu might be able to tell.
Works like a charm.