Homeowners Insurance Policy

Loan Type:    All Products 

Line of Business :    All Channels 

Effective Date:    Immediately

Coverage Requirements 

Property insurance for properties securing a mortgage to Loan Simple must protect against loss or 

damage from fire and other hazards covered by the standard extended coverage endorsement. The 

coverage must provide for claims to be settled on a replacement cost basis. Extended coverage must 

include, at a minimum, wind, civil commotion (including riots), smoke, hail, and damages caused by 

aircraft, vehicle, or explosion. 

Loan Simple does not accept property insurance policies that limit or exclude from coverage (in whole 

or in part) windstorm, hurricane, hail damages, or any other perils that normally are included under an 

extended coverage endorsement. 

Evidence of Insurance 

• All files must have a homeowner’s insurance policy.
• New policies must be valid for one year including the expiration date.
• The policy must contain all of the following:

• Borrower’s name(s) must be shown as primary insured.
• Title-only borrowers may be, but are not required to be, shown on the policy.
• Additional insureds or substitute names, not on new mortgage including LLC’s are not acceptable under any circumstances

• Property address must match mortgage records (mortgage, note, and title policy) exactly.
• Policy inception and expiration dates must be clearly indicated along with contact information for the insurance carrier and agent.
• If required by Underwriting, additional coverage types such as windstorm, flood, tornado or earthquake must be provided.
• It is acceptable to allow coverage that matches an Insurance Company’s Replacement Cost Estimator (RCE).
• Specify that claims must be settled on a replacement cost basis and that insurance policies that provide for claims to be settled at actual cash value or limit, depreciate, reduce or otherwise settle losses for less than a replacement cost basis are not eligible.
• 
  

First Mortgages 

For a first mortgage secured by a property on which an individually held insurance policy is maintained, 

Loan Simple requires coverage equal to the lesser of the following: 

• 100% of the replacement cost, as established by the property insurer; or
• the unpaid principal balance of the mortgage, as long as it at least equals the minimum amount—80% of the replacement cost—required to compensate for damage or loss on a replacement cost basis. If it does not, then coverage that does provide the minimum required amount must be obtained.

Second Lien Mortgages 

When the existing coverage for a property that secures a second lien mortgage does not provide coverage equal to the lesser of 100% of the replacement cost of the property improvements or the combined unpaid principal balance of the first and second mortgages (as long as that equals at least 80% of the replacement cost), Loan Simple must require the borrower to obtain appropriate endorsements to bring the coverage in line with Loan Simple’s requirements. A copy of any endorsements should be sent to the first mortgage servicer. 

Refinances 

Please reference the Hazard Renewal Policy for additional guidance. 

Deductible Amount 

The maximum allowable deductible for insurance covering a property (including common elements in a 

PUD, condo, or coop project) securing a first mortgage loan is 5% of the face amount of the policy. 

When a policy provides for a separate wind-loss deductible (either in the policy itself or in a separate 

endorsement), that deductible must be no greater than 5% of the face amount of the policy.

Determining the Amount of Required Property Insurance Coverage

Examples:

Coverage for Units in Project Developments 

Loan Simple generally does not require individual insurance policies for a condo unit that secures a first 

mortgage or for a co-op share loan. However, if the legal documents for the project allow for unit 

insurance policies for each first mortgage that Loan Simple originates in a condo or co-op project, Loan 

Simple will accept the individual unit insurance policies that meet the requirements below. 

Required Coverage for Condo, Co-op, or PUD Projects 

This section covers property insurance requirements for insurance policies covering the common 

elements of condo, co-op, and PUD projects—the project’s blanket or master policy. Acceptable policies 

must provide coverage for either an individual project or multiple affiliated projects. The insurance 

policy must at a minimum protect against fire and all other hazards that are normally covered by the 

standard extended coverage endorsement, and all other perils customarily covered for similar types of 

projects, including those covered by the standard “all risk” or “special form” endorsement. If the policy 

does not include an “all risk” or “special form” endorsement, Loan Simple will accept a policy that 

includes the “broad form” covered causes of loss. The applicable requirements are: 

• PUD Requirements — The HOA must maintain a property insurance policy, with premiums being paid as a common expense. The policy must cover all of the common elements except for those that are normally excluded from coverage, such as land, foundation, and excavations. Fixtures and building service equipment that are considered part of the common elements, as well as common personal property and supplies, should be covered.
• Individual insurance policies are also required for each unit mortgage that Loan Simple purchases in a PUD project. If the project’s legal documents allow for blanket insurance policies to cover both the individual units and the common elements, Loan Simple will accept the blanket policies in satisfaction of its insurance requirements for the units.
• Condo Requirements — The lender must review the entire condo project insurance policy to ensure the HOA maintains a master or blanket type of insurance policy, with premiums being paid as a common expense. The insurance requirements vary based on the type of HOA master or blanket insurance policy as follows:

o “Single Entity” policy: The policy must cover all of the general and limited common

elements that are normally included in coverage. These include fixtures, building service

equipment, and common personal property and supplies belonging to the HOA. The

policy also must cover fixtures, equipment, and replacement of improvements and

betterments that have been made inside the individual unit being financed. The amount

of coverage must be sufficient to restore the condo unit to its condition prior to a loss

claim event. If the unit interior improvements are not included under the terms of this

policy type, the borrower is required to have an HO-6 policy with coverage, as

determined by the insurer, which is sufficient to repair the condo unit to its condition

prior to a loss claim event.

o “All-In” (sometimes known as an “all-inclusive”) policy: The policy must cover all of the

general and limited common elements that are normally included in coverage. These

include fixtures, building service equipment, and common personal property and

supplies belonging to the HOA. The policy also must cover fixtures, equipment, and

replacement of improvements and betterments that have been made inside the

individual unit being financed. If the unit interior improvements are not included under

the terms of this policy type, the borrower is required to have an HO6 policy with

coverage, as determined by the insurer, which is sufficient to repair the condo unit to its

condition prior to a loss claim event.

o “Bare Walls” policy: This policy typically provides no coverage for the unit interior,

which includes fixtures, equipment, and replacement of interior improvements and

betterments. As a result, the borrower must obtain an individual HO-6 policy that

provides coverage sufficient to repair the condo unit to its condition prior to a loss claim

event, as determined by the insurer.

• Co-op Requirements — The co-op corporation must maintain a property insurance policy, with premiums being paid as a common expense. The policy must cover the entire project, including the individual units.

Amount of Coverage 

Insurance must cover 100% of the replacement cost of the project improvements, including the 

individual units in the project. An insurance policy that includes any of the following coverage, either in 

the policy language or in a specific endorsement to the policy, is acceptable: 

• Guaranteed Replacement Cost–the insurer agrees to replace the insurable property regardless of the cost,
• Extended Replacement Cost–the insurer agrees to pay more than the property’s insurable replacement cost, or
• Replacement Cost–the insurer agrees to pay up to 100% of the property’s insurable replacement cost.

Named Insured 

The table below provides the requirements regarding the name of the insured entity.

Florida 1-4 Unit Property Insurance Requirements 

Florida Statute has been updated with new laws effective July 1, 2021. Based on the initial information 

that has been provided, these new laws impact the following:

• For all 1-4 unit properties located in Florida, lenders are no longer able to ask for an RCE (replacement/reconstruction cost estimator) and insurance companies are no longer allowed to supply them.
• Homeowners insurance coverage MUST be based on one of the following:

o 100% Guaranteed Replacement / 100% Replacement Cost Coverage, or

o Coverage equal to or greater than the loan amount – extended dwelling coverage may

be included

Loan Simple’s Mortgagee Clause