30-YEAR

INVESTOR TERM LOANS

INSURANCE GUIDELINES
INSURANCE GUIDELINES
Insurance Binder & Policy – General Requirements 1
Property Insurance (1-4 Unit Properties) 2
Liability Insurance (1-4 Unit Properties) 3
Planned Unit Development (PUD) Requirements 3
Condominium Requirements 4
Property Insurance (5-100 Unit Properties) 4
Liability Insurance (5-100 Unit Properties) 6
Flood Insurance (All Property types) 6
 INSURANCE GUIDELINES

Insurance Binder & Policy – General Requirements

Required Minimum Credit Rating:

Rated no less than A- VIII in the most current edition of A. M. Best’s Key Rating Guide at all times during the term of the loan

Acceptable Evidence of Insurance:

ƒ ACORD 28, Evidence of Commercial Property Insurance
ƒ ACORD 27, Evidence of Property Insurance
ƒ ACORD 25, Certificate of Liability Insurance
ƒ ACORD 75, Insurance Binder
ƒ Binder includes policy numbers and policy effective dates
ƒ Binder’s / Policy’s initial effective date is the same as loan’s closing date
ƒ Binder is issued for at least a 30-day term
ƒ Annualized premiums must be identified and a paid receipt or invoice for balance due at closing must be submitted Binder is
received by lender no later than 48 hours after policy inception
ƒ Policy is received by lender no later than 45 days after policy inception

Coverage terms in Binder and Policy must be consistent with terms in Insurance Certificate
Binder & all Policies must name the lender as mortgagee/loss payee for property insurance and additional insured for liability
insurance. The lender must be designated as follows:
Loan Funder Series XXXX, C/O Superior Loan Servicing ISAOA/ATIMA
7525 Topanga Canyon Blvd.
Canoga Park, CA 91303-1214
Policy Term:
ƒ Term of Policy is at least 1 year from policy’s inception date (or longer if policy term is longer than 1 year)
ƒ Borrower must pay all premiums as they become due and deliver to lender evidence of the payment of the full premium
payments within 5 days of Policy’s expiration date
ƒ Renewal policies must be issued annually for the duration of loan’s term
A 30-day notice of cancellation must be provided to lender for all Policies

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Insurance Guidelines (Cont.)

Property Insurance (1-4 Unit Properties)

Required Causes of Loss Form

Property damage insurance is required for all mortgages to ensure the improvements are protected against loss or damage from
fire and other perils covered within the scope of a policy known as a “Causes of Loss – Special Form” or “All Risk” policy
Replacement Cost value (insurable value) coverage is required; except:
ƒ If the Replacement Cost value of the improvements is less than the unpaid principal balance (UPB) of the loan, the
replacement cost/insurable value is the amount of coverage required (see Property 1 in table below).
ƒ If the Replacement Cost value of the improvements is greater than the UPB of the loan; calculate 80% of the Replacement
Cost value of the improvements.
à If calculated amount is equal to or less than the UPB of the loan, the UPB is the amount of coverage required. (see Property
2 in the table below)
à If calculated amount is higher than the UPB of the loan, the calculated amount is the amount of coverage required. (see
Property 3 in the table below)

Scenario 1 Scenario 2 Scenario 3

Property Replacement Cost/Insurable Value $ 125,000 $ 175,000 $ 175,000

Unpaid Principal Balance of Loan $ 150,000 $ 150,000 $ 125,000

80% of Replacement Cost/Insurable Value N/A $ 140,000 $ 140,000

Insurance Coverage Required $ 125,000 $ 150,000 $ 140,000

ƒ Coverage may not be subject to coinsurance, unless Agreed Value coverage is provided
à 80% co-insurance is accepted for loans under $250,000
ƒ Blanket insurance may be provided by an individual policy or master policy program. Lender may reasonably require
additional information for blanket policies.

Business Interruption Insurance

Business Interruption Coverage is required for all mortgages. The business Income / Rental Value Insurance must be enough to
cover the minimum number of months of effective gross income (EGI) based on the underwritten EGI, or the most recent year-
end financials.
Business Income/Rental Value coverage may be provided on an Actual Loss Sustained (ALS) basis.

Maximum Deductible - $5,000*

*In coastal locations, a windstorm deductible will likely be higher

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Insurance Guidelines (Cont.)

Lender is required to be named as Mortgagee and Loss Payee

CAT Coverages:
ƒ Windstorm / hail coverage is always required in all states
ƒ Earthquake coverage is required at the Lender’s discretion
ƒ Other CAT coverages may also be required depending upon property location

Optional Coverages
Theft coverage; Reconstruction cost/value

Vacancies:
ƒ Borrower must promptly notify insurance carrier and lender if property becomes vacant or unoccupied
ƒ Borrower must obtain and maintain a vacancy permit from insurance carrier for the entire period of vacancy or unoccupancy

Liability Insurance (1-4 Unit Properties)

Minimum Required Coverage:

Not less than (1) $500,000 per each occurrence and (2) $1,000,000 aggregate with a deductible no greater than $1,000
ƒ Designated Location General Aggregate limit is required if more than one insured location is covered by liability insurance
ƒ Lender is required to be included as Additional Insured

Planned Unit Development (PUD) Requirements

Requirements for 1-4 unit properties also apply to residential properties within a PUD or a ground lease community.
ƒ Any coverage that does not meet the 1-4 unit requirements must be specially waived by the lender. In addition, the
homeowner association must maintain a policy which covers the common areas, fixtures, equipment, personal property and
supplies of the project.

Individual insurance policies are required on Planned Unit Development (PUD) units unless the PUD unit is covered
under the project’s blanket policy and the PUD project’s constituent documents allow the individual PUD units to be
included in the projects blanket policy.
ƒ The homeowner association must maintain “all risk” coverage for common areas and property for 100% of their insurable
value and provide for loss or damage settlement on a replacement cost basis. The policy must cover the common areas,
fixtures, equipment, personal property and supplies of the project.

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Insurance Guidelines (Cont.)

ƒ Boiler & Machinery Insurance is required equal to the insurable value of the building housing such boiler or machinery or $2
million, whichever is less.

Condominium Requirements

Required Causes of Loss Form

Property damage insurance is required for all mortgages to ensure the improvements are protected against loss or damage from
fire and other perils covered within the scope of a policy known as a “Causes of Loss – Broad Form Policy”
ƒ Replacement Cost coverage is required
ƒ The deductible may not exceed 5% of the limit maintained for building coverage
ƒ Coverage may not be subject to coinsurance, unless Agreed Value coverage is provided
ƒ HO6 / Walls-In Policy will be accepted
ƒ The homeowner association must maintain a Hazard Insurance Policy covering all of the general and limited common
elements such as fixtures, building service equipment and common personal property and supplies belonging to the
homeowner association.
Blanket insurance may be provided by an individual policy or master policy program. Lender may reasonably require additional
information for blanket policies.
The insurance policy of the condominium owner’s association must name the insured in substantially the same language as
follows: Association of Owners of the Condominium for the use and benefit of the individual owners (designated by name, if
required by law or the governing documents).
If the mortgaged premises are in a Detached Condominium Project and the condominium governing documents so permit,
Lender will accept insurance for the mortgaged premises that meets the requirements of 1-4-unit properties. The condominium
unit owners’ association must maintain all other applicable insurance coverages required.

Property Insurance (5-100 Unit Properties)

Required Causes of Loss Form

Property damage insurance is required for all mortgages to ensure the improvements are protected against loss or damage from
fire and other perils covered within the scope of a policy known as a “Causes of Loss – Special Form” or “All Risk” policy
ƒ Replacement Cost value (insurable value) coverage is required; except:
ƒ 80% co-insurance is accepted at the lender’s discretion
ƒ For loans under $2,500,000;
à If the Replacement Cost value of the improvements is less than the unpaid principal balance (UPB) of the loan, the
replacement cost/insurable value is the amount of coverage required (see Property 1 in table below).

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Insurance Guidelines (Cont.)

à If the Replacement Cost value of the improvements is greater than the UPB of the loan; calculate 80% of the Replacement
Cost value of the improvements.
» If calculated amount is equal to or less than the UPB of the loan, the UPB is the amount of coverage required. (see
Property 2 in the table below)
» If calculated amount is higher than the UPB of the loan, the calculated amount is the amount of coverage required. (see
Property 3 in the table below)

Scenario 1 Scenario 2 Scenario 3

Property Replacement Cost/Insurable Value $ 125,000 $ 175,000 $ 175,000

Unpaid Principal Balance of Loan $ 150,000 $ 150,000 $ 125,000

80% of Replacement Cost/Insurable Value N/A $ 140,000 $ 140,000

Insurance Coverage Required $ 125,000 $ 150,000 $ 140,000

ƒ Blanket insurance may be provided by an individual policy or master policy program. Lender may reasonably require
additional information for blanket policies.

Business Interruption Insurance

Business Interruption Coverage is required for all mortgages. The business Income / Rental Value Insurance must be enough to
cover the minimum number of months of effective gross income (EGI) based on the underwritten EGI, or the most recent year-
end financials.
Business Income/Rental Value coverage may be provided on an Actual Loss Sustained (ALS) basis.

Maximum Deductible - $10,000*

*In coastal locations, a windstorm deductible will likely be higher

Lender is required to be named as Mortgagee and Loss Payee

CAT Coverages:
ƒ Windstorm / hail coverage is always required in all states
ƒ Named Windstorm is required at the Lender’s discretion (required for all locations in FL)
ƒ Earthquake coverage is required at the Lender’s discretion
ƒ Other CAT coverages may also be required depending upon property location

Optional Coverages:
Theft coverage; Reconstruction cost/value

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Insurance Guidelines (Cont.)

Boiler and Machinery Insurance:

Required for any property where steam boilers, steam piping or other pressurized systems are in operation and any equipment
requiring state inspections.

Ordinance and Law Coverage:

ƒ Coverage is required for any property older than 25 years
ƒ If required coverage must include the following:
à Coverage A – Loss to the undamaged portion of the property: Full replacement cost of all real and personal property
à Coverage B – Demolition Cost: Coverage B must equal no less than 10 percent of the estimated Replacement Cost
à Coverage C – Increased Cost of Construction: Coverage C must equal no less than 10 percent of the estimated
Replacement Cost

Vacancies:
ƒ Borrower must promptly notify insurance carrier and lender if property becomes vacant or unoccupied
ƒ Borrower must obtain and maintain a vacancy permit from insurance carrier for the entire period of vacancy or unoccupancy

Liability Insurance (5-100 Unit Properties)

Minimum Required Coverage: Not less than (1) $1,000,000per each occurrence and (2) $2,000,000 aggregate with
a deductible no greater than $1,000
ƒ Designated Location General Aggregate limit is required if more than one insured location is covered by liability insurance
ƒ Lender is required to be included as Additional Insured
ƒ Insurance must be primary and non-contributory

Flood Insurance (All Property types)

Flood insurance is required if property, or any portion of a building on property, is in a High Flood Risk Zone as
determined by FEMA

Minimum Required Coverage:

Maximum amount available through National Flood Insurance Program (NFIP)

Maximum Deductible: $5,000

For Condominium projects, when the project consists of high-rise or other vertical buildings, the owner’s association must have a
separate flood insurance policy for each building that contains dwelling units.

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