HO3 w/ Rental Endorsement vs. DP3

[Hawaii Agent]

Is there any material difference in coverage between the two? I have an insured buying a house as a 2nd residence but the lender is requiring that I write a DP3. We put the rental to others endorsement on the policy but because it shows "owner occupied" on the dec, they aren't accepting the policy. Where's the gap in coverage for a HO3 w/ rental to others endorsement? Per the carrier's underwriter, the rental activity is covered because the location is listed on the endorsement.

BTW, I hate loan officers...

 

[Policy Monkey]

In Florida there is no rental endorsement for HO3s. (Although there is for HO6/condos.) Down here, any rented non-condo goes on a DP form.

And yes, loan officers suck! They have never closed a loan without insurance, yet don't know the first thing about it.

 

[adjusterjack]

Is there any material difference in coverage between the two? I have an insured buying a house as a 2nd residence but the lender is requiring that I write a DP3. We put the rental to others endorsement on the policy but because it shows "owner occupied" on the dec, they aren't accepting the policy. Where's the gap in coverage for a HO3 w/ rental to others endorsement? Per the carrier's underwriter, the rental activity is covered because the location is listed on the endorsement.

BTW, I hate loan officers...

The loan officer is correct, Mr Hawaii Agent. And somebody is not understanding what the carrier's underwriter said.

The Additional Residence Rented to Others Endorsement HO 24 70, if that's what you are using, extends only the Liability and Med Pay Coverage to the rental property.

Per the carrier's underwriter, "the liability for the rental activity is covered because the location is listed on the endorsement" is likely what he said, or if he didn't he would have expected an "agent" to know what the endorsement was all about.

Read it for yourself.

http://www.hpiainfo.com/wp-content/uploads/2015/10/HO-2470-0491-Additional-Residence-Rented-To-Others.pdf

It emphatically does not extend property coverage. Your client will need a dwelling fire policy on the property.

How do I know? I had three rentals covered for Liability on that endorsement and three separate fire policies on the rentals.

 

[Hawaii Agent]

The loan officer is correct, Mr Hawaii Agent. And somebody is not understanding what the carrier's underwriter said.

The Additional Residence Rented to Others Endorsement HO 24 70, if that's what you are using, extends only the Liability and Med Pay Coverage to the rental property.

Per the carrier's underwriter, "the liability for the rental activity is covered because the location is listed on the endorsement" is likely what he said, or if he didn't he would have expected an "agent" to know what the endorsement was all about.

Read it for yourself.

http://www.hpiainfo.com/wp-content/uploads/2015/10/HO-2470-0491-Additional-Residence-Rented-To-Others.pdf

It emphatically does not extend property coverage. Your client will need a dwelling fire policy on the property.

How do I know? I had three rentals covered for Liability on that endorsement and three separate fire policies on the rentals.

Thanks @adjusterjack. The biggest issue is that the insured has no intention of renting out the property. We're doing this policy to satisfy the loan and would remove the endorsement upon closing. It's just a clusterfuck for lack of a better word.

 

[Policy Monkey]

Hmmm. I missed the "2nd residence" part of your initial post. If the house is never rented, then the HO form should be correct. Just make sure it's rated as secondary/seasonal.

I wonder if the client structured the loan as an income property. I can't think why else the lender would need rental coverage or have issue with "owner occupied" on the declarations.

 

[adjusterjack]

If he's going to use it as a second home, there's no reason not to write an HO-3 on it.

Snowbirds do it all the time when they have a vacation home somewhere else.

The lender wants evidence of fire and extended coverage on the property to protect its own interests in the event of loss to the dwelling. The lender is right about that.

 

[adjusterjack]

Hmmm. I missed the "2nd residence" part of your initial post. If the house is never rented, then the HO form should be correct. Just make sure it's rated as secondary/seasonal.

I wonder if the client structured the loan as an income property. I can't think why else the lender would need rental coverage or have issue with "owner occupied" on the declarations.

I think somebody is thinking that the HO policy on the owner's primary home is extending property insurance to the second home. HO policies don't do that.

 

[Hawaii Agent]

If he's going to use it as a second home, there's no reason not to write an HO-3 on it.

Snowbirds do it all the time when they have a vacation home somewhere else.

The lender wants evidence of fire and extended coverage on the property to protect its own interests in the event of loss to the dwelling. The lender is right about that.

IDK, in HI we write these as HO3 secondary res. That's how we were told to insure these properties. They want to know who watches the property when vacant and include a 3rd party monitored alarm system.

 

[adjusterjack]

Seems simple enough. The client complies with the lender's requirements or he doesn't get the loan. He complies with the insurance requirements or he doesn't get the insurance.

Where is the disconnect? What does the client want from you?

 

[marindependent]

I am somewhat surprised that the loan officer even knows how to read the policy to that extent. Why are they requiring a DP3? Where is that written.

HO3s for second homes happen all the time. So do DP3s.

Seasonal or Second home insurance issuance can be fairly complicated and there are several potential solutions. Insurers do these differently and I would not say that there is just one way to do it. Go ask Chubb.

Throw in short term rentals and the category is a challenge.

Perhaps the Lender is concerned because they think that the HO3 means that the client is telling the insurer that they will reside in this second house full time, when the loan is not funded as such.