Insurance needs for Subject To Lease Option?

5 Replies

I'm getting ready to close soon but I need some assistance on how the insurance works. I saw Grant Kemp say that the new buyer goes down as "insured" and seller goes down as "additional insured." What happens to the insurance that is already in place with the seller since it's included in the mortgage payment? Which insurance companies are ideal for a Sub2 deal?

@David Morgan the seller's insurance policy is canceled and the new policy is put in place.  I let my insurance broker handle that.  If you're buying SUB2 and then putting in a tenant/optionee you're the owner and responsible for the insurance.  You would be listed as the primary insured and your seller as an additional insured. You'll want to get a landlord policy and require that your tenant/optionee secure a renters' policy.

Hope this helps.

Originally posted by @Bill Walston :

@David Morgan the seller's insurance policy is canceled and the new policy is put in place.  I let my insurance broker handle that.  If you're buying SUB2 and then putting in a tenant/optionee you're the owner and responsible for the insurance.  You would be listed as the primary insured and your seller as an additional insured. You'll want to get a landlord policy and require that your tenant/optionee secure a renters' policy.

Hope this helps.


Most things I have read, said that if the name on the insurance policy is different than the name on the mortgage it will raise a red flag with the lender. And do you recommend a minimum requirement on the renters insurance?

@David Morgan , ANY change to insurance will usually come to the attention of the lender - even changes that are not a result of a SUB2 deal.  Lenders want to see the name of the borrower on the insurance policy.  This is why they are listed as an additional insured.  Here's the thing:  The OWNER of the property has the insurable interest and should be the primary insured on the policy. (According to my insurance guy anyway.) If you take the deed subject to the underlying loan YOU are that owner.

As to the renters insurance - I leave that to the tenant and HIS/HER insurance pro.  I simply tell them they must carry their own policy.