The importance of accurate account information cannot be overstated. As you know, inaccuracies in your clients’ insurance documents can lead to serious consequences. The last thing any property owner wants to deal with after suffering a loss is the frustration of filing a claim and discovering that coverage is unavailable due to a clerical error. Below are some important considerations for your investor clients. 

Named Insured

The entity listed as the Named Insured on a property’s Evidence of Insurance is the primary recipient of coverage for all associated policy products. This may include dwelling coverage, premises liability insurance, and any ancillary products. Essentially, the Named Insured represents the party with the insurable interest in the property, meaning they would suffer financial loss or other hardships in the event of damage or loss. Ask your clients to consider this scenario: 

I have an insurance policy under my name, Shawn Woedl, for 123 Main Street, but tenants pay rent to my entity that actually owns the property, which I call SW, LLC. If one of my tenants slips and falls down the stairs, breaking their leg, they’re going to sue SW, LLC, because that’s where they pay their rent. If SW, LLC is not listed as Named Insured on my policy when that claim comes in, there is no liability coverage for that entity. The Named Insured on the insurance policy must always be the entity that purchased the property. Otherwise, the incorrect party will be the recipient of coverage.  

It’s also important to note that should a loss occur, the payee for any claim settlement will be the Named Insured as listed on the Evidence of Insurance (EOI). The owning entity must have a bank account to be able to cash/deposit any claims checks made in their name. If the Named Insured is inaccurate, and the entity is unable to cash/deposit the check, documentation will have to be provided to change the name of the loss payee to whomever the Named Insured should have been, which most likely will result in settlement delays.   

Additional Insured

Additional Insureds are entities who have the authority to make claims on the policy or have insurable interest in the property but are not the policyholder. Each entity listed as an Additional Insured is entitled to coverage for the policy products they are named on. It’s important to note that certain roles, such as mortgagee, loss payee, and lender’s loss payee, are automatically added as loss payees on any claim settlement check.  

Changes in mortgagees, lenders, or partners can lead to inaccuracies in the Additional Insured information. If an Additional Insured’s name or role is inaccurate on the EOI, documentation will have to be provided to change the name/role to what it should have been. These errors can result in the incorrect party receiving coverage, claims payments, and/or delays in claims settlements.  

Lender Information  

It is crucial that you receive complete lender information from your client when coverage is initially bound and any time the loan is sold to another mortgagee. This includes details such as: 

• The complete name and address of the lender 
• The fax or email address of the lender  
• The loan number  
• Notice of whether or not the loan is escrowed 

If your client fails to provide you with complete or updated lender information, the following complications can arise in both billing and claims settlement processes: 

Missing loan numbers- Lenders often submit escrow checks with just a loan number as the location identifier (no property address). If your client has not provided the correct/complete loan number for each location, we are unable to identify where the funds should be applied when we receive those checks. If funds are depleted before the issue can be rectified, coverage may be canceled for non-payment.  

Loan sold to another mortgagee- When a loan is transferred to a new lender, it’s crucial that your client updates mortgagee information promptly. The worst time for a paperwork delay is after your client’s property has experienced damage. To avoid the scramble of getting insurance documents corrected after a loss, investors must keep their lender information up to date. In addition to claims delays, failure to maintain correct lender information can also result in inaccurate invoicing, causing funds to deplete and ultimately leading to the cancellation of coverage due to non-payment.  

Force-placed coverage- A bank or mortgagee may force-place insurance on an investment property when coverage has lapsed or been deemed insufficient. If the loan number is missing or the Named Insured is incorrect on your client’s account, the lender will be unable to update coverage information.  

Review EOI For Accuracy

Generally, it’s a good idea for investors to review their insurance documents for accuracy at least twice a year. Some investors may choose to use daylight saving as an indicator that it is time to check the above information. Of course, if major changes are made to the property or account information, investors should take that as a sign to review and update as soon as possible. As the insurance agent, we encourage you to work closely with your clients in ensuring their EOI maintains up-to-date information.