Private lender looking for specifics on Insurance question

[Chris D.]

Hi BP members - I am not knowledgable about insurance. I'm lending to a borrower who has multiple flips going on. I just want to make sure I am adequately insured so would appreciate any feedback from insurance professionals or other lenders. The property is in Maryland. The type of insurance I'm getting is Builders Risk. I notice there are 3 categories under type of insurance. There is Basic, Broad and Spec. None of the boxes are checked. The limit listed on the Binder is for my loan amount. There is commercial general liability listed of $1M per occurrence and General Aggregate of $2M and Personal and Adv. injury of $1M. I took a great class in private lending where we were advised NOT to accept binders because they can be cancelled. In Maryland this binder states, "the insurer has 45 business days, commencing from the effective date of coverage to confirm eligibility for coverage under the insurance policy."  This clause does not give me a warm fuzzy. Any advice would be greatly appreciated. 

[Derek Lacy]

Big issue here. Many incorrectly use builders risk as the name for a policy. Traditional builders risk will only cover renovations, not existing structure. So make sure existing structure coverage applies. Most insurers will call that policy a renovators risk.

Other times they will incorrectly name a vacant dwelling policy a builders risk.

Lenders do not accept binders. Well maybe I should say should not. Evidence of property insurance (EPI) is what you should accept. Acord form 27 or Acord form 28 for commercial property.