In order to get a mortgage on a condominium, the condominium association has to have sufficient insurance.
Unit owners are tasked with getting a certificate of insurance from the insurance agent and providing it to the mortgage company on an annual basis.
Mortgage companies have gotten stricter with their requirements. Now lenders provide lists of what needs to be on the certificate:- The policy needs sufficient replacement coverage – and to be paid on a replacement cost basis
- Liability insurance with minimum $1M coverage
- Fidelity bond coverage
- Inflation Guard: if it is not included, is it available and the HOA opted against purchasing it?
- Is there a coinsurance clause?
- Is the policy reviewed annually to determine the limit is sufficient?
- Cancellation is minimum 10 days?
- Building Ordinance / Law endorsement Coverage must be included
- Boiler Machinery / Equipment Breakdown – if not covered, are the HVAC maintained by individual unit owners?
- Does the policy cover the unit as originally conveyed to the first unit owner? Is it studs out? Does it include improvements and betterments?
- Total # of Units
- How is the replacement cost determined? Appraisal or Replacement Cost Estimator?
- Are there any sublimits on the policy?
- Is the entire policy replacement cost value? – Is the roof paid on as actual cash value?
In this market, some carriers will not give full limits on water damage claims (on condominiums that have had many losses for water damage) or wind/hail damage for those buildings that are high valued and in the coastal area. Mortgage companies will no longer accept sublimits on a condominium policy.
Mortgage companies get their requirements from Fannie Mae and Freddie Mac. In order to get the loan backed, they need all the Fannie/Freddie requirements met.
What this means for condominium associations: If the condominium association cannot secure proper coverage, the ability to get a loan will be hindered. This makes it difficult to find a buyer if a unit owner wishes to sell. It lessens the market value of your property if a loan can not be secured on a unit.
We at Deeley want you to Be Sure that we will work with your mortgage companies and Boards to try and secure the best coverage for the association at the lowest premium.
Got questions? Need guidance? Reach out to the friendly Coastal Community Insurance Experts at Deeley today. Our dedicated Community Association Practice team is ready to help you!
