Bought a farm on contract / does seller still need insurance

I am sure some insight will be provided on this forum about this issue. I bought a farm in December on contract from my mother. I have the normal farm policy insurance in place now (includes $1,000,000 liability), although I am considering changing insurance companies. An agent at a new insurance company I am considering says my mom still should be carrying liability insurance on the farm as she is still consider an owner. I was puzzled. The contract has been recorded showing me as the new owner. If you buy a car with a loan the purchaser of the car carries the insurance. I have never heard of the car lending agency getting sued even if the car is in the lenders name. Wouldn't there be somethings similar between a farm mortage and an automotive note? Some of you surely have sold property on contract or have experiences with relatives who have. What do you think?

Does you mother still live on the farm in question as your tenant? If so, the she probably also should have some liability coverage.

Not sure what you mean by contract? Did you get your own mortgage and pay the required down payment and have lawyers do all the paper work to put the title in your name? If your name isn't on the title by itself, it would make sense your mom still carried insurance until the title was solely in your name. It sounds like you made a deal to purchase the farm from your mom but could theoretically back out of it and leave your mom on the hook or having to take you to court to get paid the money owing. I'm not saying you'd do that but that might be the reason the insurance company recommends your mom still carry insurance. With a conventional mortgage/purchase the seller is paid up front and the bank is listed as the lien holder on the title not the seller. Sometimes the seller will offer financing for the purchaser but I'm not sure how that works. Dave

My mother moved to town. The sale was done via my parents lawyer using the Iowa State Bar Association Real Estate Contract form. The Real Estate Contract has been recorded at the county recorders office. My name has been entered for taxation on this property. There is no outside lender. I am paying my mother yearly principal and interest.

Is your moms name still on the title? If the title is in your name only, I think your insurance should be sufficient. Ask the insurance company for their reasoning. Insurance companies like to invent ways to take more of your money. Dave

Others will chime in (look for the legal eagles John T or Mike WA for the good advice and they will both say consult local counsel)but.....

When you say purchase on contract that implies something different to me than purchased with Owner financing (mortgage). On contract (Contract for Deed) would tell me that your mother still indeed "owns" the place and could have some liability associated with that. You might be able to address that by naming her as an "additional insured" on the policy you have (talk to your agent and see if they can accommadate that). If your mother is holding a mortgage (loan) than you are the Owner and I don"t see how she could be liable in that case.

As somebody else mentioned, issues of residence could bear on this. Consult local experts.

Kirk

Maybe I'm missing something since I'll never own a new car with borrowed money now, and never have in the past.

As it works here in NY - IF you buy a new car but do NOT pay for it with your own money, it goes like this. The lender is the lein-holder and has it's name on the title you get from the state. So, the "buyer" is not the true owner. Part of that lending agreement is that . . . the car is always covered with enough insurance to cover a loss. If there is a loss, the money-lender gets notified. If insurance lapses, the State DMV notifies the lender.

Now, again here in NY, farms sold on "land contract" can be done many different ways. One is - the seller keeps title until the loan is 100% paid. So, during that payment time, the seller is still . . . legally the owner and gets the tax bill. Having a "contract" does not make you the owner. If your contract is recorded, technically you are the contracted buyer, not the owner - until the grantee's deed gets recorded in your name and you get the tax bill.

Land contracts can differ a lot. All depends on how written. Part of the contract usually specifies who pays insurance, who pays taxes, if any tree cutting is allowed, how building maintenance is done, etc. When banks lend money, they make their own rules for mortgages. When private owner's sell land by contract, they make their own rules.

You may want title insurance in case someone from the past has claim on property. I owned a place ten years and when time to sell, up pops the claimant. Insurance for your mom, sound crazy. Insurance company will suck her dry. Lawyer should know all this.

You can add her to your liability policy as a 'Contract Seller' at very little cost to you. Often done here and generally is a requirement in the contract.

So your mother is the mortgage hoder.Does she have it recorded as such?

Vito

I have bought, sold, and prepared land contracts for years for clients and typically require the purchaser to furnish insurance (in amount approved by seller) in the names of the Seller and Buyer with respect to their insurable interests to protect BOTH parties.

This is NOT a question you want to hang your hat on as far as the answers received here regardless if from attorneys let alone lay persons on a tractor forum as it depends on the contract terms and laws of your jurisdiction.

Consult local counsel, I have told you how I do it in my jurisdiction but thats pursuanmt to my contract terms and the laws in my jurisdiction

John T Attorney at law