Commercial property guide
What lenders require for commercial property insurance
Every lender writes its own requirements, but most ask for the same building blocks. Here's what to expect, and how to keep insurance from holding up your closing.
Where to find your lender's requirements
They're usually a section of the loan agreement or a separate insurance exhibit. Ask for it as soon as you have a term sheet. The earlier your broker reads it, the fewer surprises at closing.
The common requirements
Many lenders ask for most of these. Yours may ask for more, or define them differently.
- Named insured
- The name on the policy matches the borrowing entity.
- Mortgagee and loss payee clause
- The lender is named exactly as its documents specify, so its interest in the building is protected.
- Additional insured
- The lender is added to the liability and umbrella policies.
- Replacement cost valuation
- The building is insured for the cost to rebuild, without a deduction for depreciation.
- Limits and deductibles
- Coverage limits meet the lender's minimums, and deductibles stay within its maximums.
- Loss of rents or business income
- Lost income is covered for a set period while the property is being repaired.
- Insurer financial strength ratings
- Each insurer is rated at or above a minimum the lender sets.
- Specific perils, where relevant
- Flood in mapped flood zones, earthquake (often tied to a seismic study in California), terrorism, and ordinance or law.
- Notice of cancellation
- The lender is told before a policy is cancelled.
The documents
What your lender will usually want in hand before it funds.
| Document | What it is |
|---|---|
| Binder | Temporary written confirmation that coverage is bound, until the policy itself is issued. |
| Evidence of commercial property insurance | A standard form (often an ACORD 28) showing the property coverage on the building, with the lender named. |
| Certificate of liability insurance | A standard form (often an ACORD 25) showing your liability coverage. |
| Policy endorsements | The written changes that add the lender's required wording to the policy itself. |
| Broker's certification letter | A letter confirming that coverage meets the loan's requirements, where the lender asks for one. |
Agency lenders
Fannie Mae and Freddie Mac publish detailed insurance requirements for multifamily loans. They cover how insurable value is set, minimum coverage amounts and deductibles, business income coverage, ordinance or law, insurer ratings, and the evidence of insurance a lender must collect. Both guides change, so we read the current version for every loan.
How we use this
We read your lender's exhibit, map each line to your coverage, flag anything that won't fit before it becomes a closing problem, and send the documents to your lender directly.
Have a date coming up?
Tell us what's happening and when. Your broker will reply within one hour on business days.