In the real estate industry, lender requirements are crucial to ensure compliance with loan covenants. However, lender insurance requirements are not keeping pace with the changing insurance market conditions. Prior year loan requirements for certain limits and deductible maximum requirements are no longer offered in the insurance market.
This often forces insureds to spend too much time and money trying to meet untenable or outdated lender requirements. For example: requiring an earthquake limit of $50M when the modeling dictates an appropriate limit is $25M or a lender may require that a Named Storm deductible in Florida be no larger than 2%.
Your insurance broker should be able to:
- Review the lender requirements: Different types of loans have different requirements. A broker should review all requirements to ensure they fit the level of risk.
- Negotiate on your behalf: Clients should not have to tell the lender that a requirement is not commercially available in the insurance marketplace. An experienced broker will have the tools and resources to present lenders with data that supports the lender waiving one or more untenable insurance requirements.
- Add an Endorsement: Brokers should make sure the insurance carrier has the needed endorsement to provide the lenders with the contractual language for the policy. Lenders can be very particular when it comes to how the policy is structured.
- Structure a policy to meet requirements: Once the requirements are sorted, the broker should be able to make any necessary revisions to the policy structure and terms to meet those requirements.
Working with a dedicated real estate insurance broker that understands how to negotiate with lenders can save you money on your insurance spend and next closing. Contact a Marsh McLennan Agency (MMA) advisor.