07 Feb Protect yourself prior to foreclosure
The property owner’s exposure for personal injury claims doesn’t end when he stops making the mortgage. Even if you are resigned to letting a property go in foreclosure, maintain liability insurance on the property until the foreclosure sale. Otherwise, you may be sued for injuries incurred on property you were giving back to the bank.
American law makes the property owner liable for most bad things that happen on the property. The policy idea is to encourage the owner to obtain insurance from which the injured can be compensated. Title to the property doesn’t change until the foreclosure sales is held. So even if you’ve moved out of your house in advance of the foreclosure or are surrendering a vacant rental, you are liable for injuries that occur on that property until the sale.
Don’t confuse liability insurance with insurance on the building that will cover you from fire or other damage to the property. The secured creditor can and will get that kind of insurance to protect its investment in its collateral. The bank, however, has no reason to protect you from the lawsuit filed by someone who breaks a leg (or worse) on the doorstep. That suit won’t reduce the value of the property it will acquire at foreclosure.
Keep the liability insurance in place until the foreclosure so the house doesn’t haunt you long after the sale.
Cathy Moran, Esq.
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