Lender Requirements Shouldn't Cause a Headache
Part 6 of 8: What Your Insurance Broker Isn’t Telling You
Whenever something is marked ‘required’ – especially when it involves additional documents or paperwork – naturally your next reaction is a long and heavy sigh. But, because of the nature of real estate and business insurance, requirements are crucial to ensure full protection and coverage for assets within your program. It may take extra time, research and work on your end, but it’s worth it when you have peace of mind that the deal is done.
Now to get down to business. Anyone who owns real estate is all too familiar with how the purchase can be a complicated process. To help protect their money, lenders set strict requirements and guidelines for what needs to be in place to approve your purchase. If your building’s insurance doesn’t meet those requirements, you’ll be one step further away from closing and one step closer to a massive headache.
This is where your insurance broker enters the scene. A skilled broker will be familiar with the standard lender requirements and be able to quickly assist with getting a program put into place that will meet those requirements. Sounds simple, right? However, much more goes into this than simply writing a policy. Before writing a policy, the broker should:
- Review the Lender Contract: brokers take this step to make sure the requirements fit the risk. Different kinds of buildings can have different types of loans which lead to different 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.
Once the buyer is approved, they should be able to reach out to their broker with the details on the new purchase or project, and the broker takes it from there. They review the requirements, make any needed recommendations or revisions and structure the policy to meet those requirements including all needed contractual language and terms. Once this happens, the purchase should move along very smoothly.
One of our ‘A’ Team real estate members is ready to help you learn more about lender requirements. Contact us!
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