Transfer to LLC and insurance

[Krystle Irvin]

If you transfer your rental property to an LLC, do you notify your insurance company and have it changed to a commercial policy at that point?

[Russell Brazil]

Yes....if you do not update your insurance, then the new owner of the property of the LLC is not insured.

Also, you will need to refinance to a commercial loan. Once you update your insurance, the insurance carrier will notify the lender and that will trigger the due on sale clause.

The reason the due on sale clause is typically not triggered, is because people do not update their insurance....thus in an attempt to limit their liability they do the opposite and blow up their liability by forgoing insurance.