Losing homeowners insurance.losing home?
This is a somewhat complex question that I don’t expect any answers to on this forum but hope for recommendations for who to consult. The family home supports two elderly family members as their care becomes more complex and more expensive. Unfortunately, the homeowners insurance has not been renewed and it’s possible we will not be able to find another policy. The home is 90% paid off, but still carries a six-figure mortgage. It is multi family with some parts rented out. We could sell, but we would have to sell far below the worth of the property in this market. We could cash out some of our own retirement to pay off the mortgage (banks will not carry a mortgage on a home with no insurance). But I am concerned about the idea of running a rental with no insurance. How do we protect the rest of our assets? Would we be utterly stupid to take this step?
Parent Replies
In the worst case scenario, you can get insurance through the California FAIR Plan—it's just very expensive. You'll have to assess whether that cost is worth it versus the loss you'd take if you sell the property, and go from there. Definitely continue to call insurance brokers to see what other options you have and ask your neighbors who is insuring their properties, though. There may be other less costly options out there. Good luck!
I was worried about losing a house due to home insurance being dropped at one point as well. I found out that, at least in my case, the mortgage company (which was not the originating bank) would provide their own insurance, just at about 4x what I had been paying. So the options weren't, find insurance or lose your house -- it was find your own insurance or we'll force you to buy ours and you'll pay an awful lot for it. So in the scenario where you don't use savings to pay off the mortgage -- you'll probably keep the mortgage and insurance, just with expensive insurance.
That's not great, but it's better than losing your house outright, and perhaps better than having no insurance at all, so it's worth checking with your mortgage company what is actually going to happen.
We recently had our homeowners policy cancelled on a duplex. After lots of shopping around and multiple rejections we received two offers of insurance. First from AAA Rockridge Branch, which was very expensive, and second from a broker with Goosehead Insurance, whom we went with and are paying less than before.
Goosehead contact is:
dan.lapicola at goosehead.com
Best of luck.
There is no way on earth I would own a rental property without insurance - just imagine what might happen that your relatives could be held liable for. We do own rental property and carry an overabundance of liability insurance. Agree you should keep shopping around, but you don't really want bare bones insurance either - you need to contact brokers (and not just ins. co's) who can help you. Alternately you could pay it off and take out a very expensive umbrella policy - but you would need to discuss with a broker or real estate lawyer how well covered you would be from liability in that case.
I'm not sure why you think a sale would not be advisable 'in this market' - if the property is located in the Bay Area sales are quite strong regardless of higher rates, the bigger issue is whether you have under-market tenancies. If it were me, I'd contact an agent who specializes in multi-family properties about the prospects for a sale to be better informed.
Agree about contacting Goosehead, that's who we are going with after being dropped by our old carrier because it was exiting the entire CA market.
Your question raised for me the additional question of, who is managing the rental aspects of this property? Is it being done properly? I'd be very concerned about being liable for tenant complaints.