insurance policy cancelled whats next?

6 Replies

I have a few rental properties that I have recently purchased. I received a letter from my insurance company today stating that they had to cancel my policy due to water damage to the ceiling of one of my units.

I only purchased the property a few months ago and I had an inspection done that did not show anything like this nor have I heard anything from the contractor that my property management company had go in to the property to take a look.

None the less this is obviously something I am going to have to take care of. My immediate concern however is how this cancellation of insurance will affect my mortgage on my loan. I am worried that if I am not able to secure insurance with another company while I fix this problem that my loan may be called due by my lender.

Does anyone have any knowledge or experience with this kind of thing? I am only new to the investment world, what should my next course of action be to ensure my mortgage remains in tact. This has really blind sided me and I am pretty worried. 

Step 1 of course, find new insurance.

No, the bank won't call your loan, But they will secure Force Placed insurance, which they have a right to do, and it will costs 2-4 times what you'll pay for your own policy, and will have worse coverage, and you will of course have to pay for it, or be foreclosed on.

Call around. You should be able to find insurance on the property presuming you're working on fixing the ceiling/roof.

The bank will likely send you a nasty letter, but as far as I know, shouldn't do anything drastic. They will initiate their own insurance policy, that may be more expensive than yours. But for a couple weeks, it shouldn't be too much impact.

Can you get the ceiling/roof fixed quickly so you can tell the next company that it's fixed? I'd also call your current company and ask if they will reinstate if it's fixed. It seems sort of drastic of them to cancel outright.

They did say they would reinstate if it was fixed. The question now is how expensive an operation this is going to be...

That sounds strange. It sounds like you didn't even know there was water damage, so how would the insurance company know?

My experience is that water damage from something like a plumbing leak is usually not worth reporting to your insurance. The repair cost will probably be less than the deductible, and who wants a black mark with the insurance company?

To answer your question, if you don't have insurance, the bank will buy insurance to protect their interest and then charge you for it. It's a lot more expensive and only covers the bank's interest, not yours. They'll usually send a notice and give you something like 30 days to reinstate your coverage.

Yeah I had an inspection done when I bought the property about two months ago and nothing came up. Then USAA did their own inspection and that is when this water damage was discovered.

Get it fixed, send them pictures and receipts...whatever they want...reinstate your policy. I have had insurers tell me to fix things on a new sf purchase. Add lattice to keep critters from getting under pier and beam house snd causing damage, prune trees off roof....both we were planning on doing but insurance forced it to the top if the list.