Insurance Requirements
What your policy needs to include for your loan to close and fund, what it depends on by loan type, and how to keep coverage active after closing.
Get Your Agent Started Early
Insurance is one of the most common reasons a closing slips. Share this page with your insurance agent as soon as your term sheet is signed. A policy that meets every point below the first time keeps your closing on schedule.
What Every Loan Needs
Every loan needs property insurance that meets these standards:
- The insurer is rated AM Best A- or better.
- The coverage form is Broad Form or Special Form, and the form is stated on the evidence of insurance.
- The policy term is at least 12 months.
- The named insured matches the borrowing entity exactly.
- Wind coverage is included, not excluded. It can sit on a separate state wind pool policy.
- Deductibles:
- All other perils: $5,000 or less.
- Wind, hail, hurricane and named storm: the lesser of 5% of dwelling coverage or $50,000.
- The premium is paid before funding, unless it's paid in full through closing on your settlement statement.
- Upright is listed exactly as shown:
Upright Lending, LLC ISAOA ATIMA
1300 E 9th St, Ste 1310
Cleveland, OH 44114
Rehab and New Construction Loans
- Dwelling coverage: the full renovation budget plus the full cost to rebuild the property. That's reconstruction cost, not the purchase price or market value.
- Builder's Risk or a renovation endorsement: required while work is underway. A Builder's Risk policy, Renovation Endorsement, Improvements Endorsement, or similar wording that confirms coverage during construction all work.
- Occupancy: the policy lists the property as vacant.
- Commercial General Liability:
| Coverage | Minimum |
|---|---|
| Each occurrence | $1,000,000 |
| General aggregate, loans up to $600,000 | $1,000,000 |
| General aggregate, loans over $600,000 | $2,000,000 |
| Medical payments | $2,000 per person |
Rental (DSCR) Loans
- Dwelling coverage: at least the loan amount or the cost to rebuild, whichever is lower.
- Policy type: a landlord or rented-dwelling policy for a tenant-occupied property. It does not need to list the property as vacant.
- Rent loss coverage: at least 6 months.
Flood Insurance
We check every property's flood zone during underwriting. Flood insurance is required when the property sits in a FEMA high-risk zone, meaning any Zone A or Zone V designation.
Coverage must equal the loan amount, up to the federal program maximum:
- $250,000 for 1 to 4 unit properties.
- $500,000 for 5 or more units.
When Coverage Is Below the Loan Amount
If your dwelling coverage is less than the gross loan amount, ask your agent for a Replacement Cost Calculator. It documents what the property would cost to rebuild, and we'll need it before closing.
What to Send Before Closing
- Evidence of insurance or the declarations page, showing the coverage form, term, deductibles, named insured and Upright's clause.
- Proof the premium is paid, or the invoice if it's being paid through closing.
- Rehab and new construction: the Builder's Risk or renovation endorsement, and your general liability certificate.
- Rental loans: confirmation of rent loss coverage.
- Flood zone properties: the flood policy declarations page.
- A Replacement Cost Calculator, if coverage is below the loan amount.
Your dedicated branch reviews everything and will tell you right away if anything needs to change.
Keeping Coverage Active
Your policy has to stay in force for the life of the loan. Renew before it expires and send the renewal declarations page to your loan servicer (see Understanding Your Loan Servicer). A lapse is flagged on your loan, and current insurance is also part of any extension review.