Contract's Insurance Clause

9 Replies

Hello everyone,

I have a Seller that wants her contract to exclude the Insurance clause per addendum.

Clause:

INSURANCE: As consideration for this purchase the Seller will assign all insurance policies on the property to the Buyer and Seller will grant a limited power of attorney to the Buyer to deal with the lender(s) and insurance provider(s).

The issue from what she explained to me was that she has no lender's because she owns it free and clear... (I explained to her that she is automatically exempt from the lender portion of the clause due to that fact) she also does not want to grant the POA to buyers to deal with the insurance company.

She just doesn't want to because she doesn't think it's necessary.

I have a Risk of Loss clause which allows for an option out if the property were to be damaged

Clause:

RISK OF LOSS: If subject property is damaged prior to transfer of title, Buyer has the option of accepting any insurance proceeds with title to the property in “as is” condition or of canceling this contract and accepting the return of the deposit.

so I didn't  necessarily see an issue with excluding it in an addendum, but I'm not 100% sure.

Does anyone see this as being a issue the may come back to bite me?

Thanks in advance

That's what I thought. Thanks

It's typical for existing insurance policies to be canceled, and the buyer has absolutely no interest or rights to a prior policy.

Updated over 2 years ago

Sounds like some guru clause for sub2's.

That clause is questionable at best.  An underwriter at the insurance company will not accept the power of attorney to just change the insured to another insured anyway, they want to fully underwrite the policy.  Meaning, that it's basically a null clause, as it would not work as intended.  The insurer would be well within their rights to deny any transfer of ownership as all standard insurance policies are non-transferable.  The reason for this is to stop a straw man purchase of insurance (I had 10 claims on my record, so I get my brother in law to buy the policy and transfer it to me, because I cannot get affordable insurance).  

So feel very good excluding that clause as it's a junk clause. I have 400 underwriters I deal with and none would accept a POA to transfer the insurance.

As others have mentioned, mortgage and insurance policies are not transferable.

When you're dealing with AS-IS, I would recommend you getting pictures with dates to record the condition and items in the house to be included in the sale. That's your protection in case they decide to take the HVAC unit on their way to the closing. There is a clause that you can add that states something to that affect.

Much success

Wondering if you can say little more about the type of deal.  I'm with the seller on this.  Get your own policy.  Once the seller deeds to you or your buyer, she's no longer the owner and the the insurance company isn't going to cover a claim.  Where'd you get this clause?

Thank you for all of your responses.

This clause was actually in one of the contracts I pulled off of the Biggerpockets File place.

At no point was this ever thought of being a deal breaker as I was pretty sure that it wouldn't stop stop anything. I just wanted to get advice from others that may know more about the situation.

To speak more on the type of deal. This is a regular wholesale deal. Free and clear from DM absentee out of state campaign. Worth $80k-$85k. We agreed on a figure @ 70% arv- (est repairs+profit) and everyone seems comfortable with the number. 

Exit strategy for me is to wholesale. Thats the niche I focus on at the moment. 

@k. Marie p. Was there a more specific question about the deal you needed answered?