Insurance for Subject To property

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I have a question for landlords who have bought properties “subject to” existing mortgage and are renting them out.

I haven’t done this type of deal before, but I’m looking at one now where the property has good equity and the cash flow (rent minus mortgage) looks solid.

From what I understand, the seller’s insurance policy should be canceled at closing, and I should get a landlord insurance policy in my name, with the lender listed as the loss payee.

However, a few insurance agents have told me I should also add the seller as an “additional insured.” They say if the bank sees that the seller is no longer on the policy, they will dig down further and when they see the title changed, they might call the loan due.

I do have power of attorney from the seller, and one agent said I could use that to sign a claim check if needed. But I'm worried about what happens if the seller passes away during the loan term, then the POA would no longer be valid.

I asked about adding the seller as an “additional interest” instead of “additional insured,” but was told that could risk the lender rejecting the policy.

This is making me hesitant to move forward with the deal.

If you’ve done a subject-to deal, I’d really appreciate hearing how you handled insurance and any claims.

Thank you!