Property Insurance On California Private Hard Money Loans
By G. David Lapin On June 20 2023
Requirements that private-hard money lending looks for regarding property and casualty insurance
Property and Casualty insurance requirements can vary depending on the lender and the specific terms of the loan. Property insurance typically covers the physical structure of the property against risks such as fire, theft, vandalism, and certain natural disasters. Casualty insurance, on the other hand, provides liability coverage for damages or injuries that may occur on the property.
By requiring property and casualty insurance, the lender ensures that the property is adequately protected in case of unforeseen events. If the property is damaged or destroyed, insurance coverage can help cover the costs of repairs or replacement, thereby mitigating the lender's risk.
It's important to note that the specific insurance requirements can vary among lenders. Some lenders may have specific minimum coverage limits or may require additional endorsements or named insureds on the policy. Borrowers should consult with their lender to understand the precise insurance requirements for their hard money loan.
When seeking to close a private hard money loan, property and casualty insurance requirements are not on the borrower’s radar as securing an insurance policy in general is relatively straightforward, that is until recently.
Two major carriers are ceasing to write new homeowner, condominium, and commercial insurance policies in California due to inflation, wildfires, and rising reinsurance costs.
• State Farm declared in late May that it wouldn’t sell any new home insurance policies in California.
• Days later, Allstate had quietly made the same decision.
This could possibly affect real estate values in the high-risk areas. State Farm has stated the reasons they pulled out of the California market were because of the cost to replace, the rapidly growing catastrophe exposure area, and lastly inflation.
California’s unsettled market aligns with trends across the country in which companies are boosting rates, limiting coverage, or pulling out completely from regions susceptible to wildfires and other natural disasters in the era of climate change.
California still has about 115 companies offering home insurance, said Michael Soller, a deputy commissioner for the state’s insurance department.
Admitted vs Non-Admitted Insurance Carriers
How do admitted and non-admitted insurance companies differ? If an insurance company is admitted, it means they've met the regulations set by the state Department of Insurance (DOI) in the areas they work. In comparison, non-admitted insurance carriers have not met their state's requirements.
• LIST OF APPROVED SURPLUS LINE INSURERS (LASLI) – NON-ADMITTED.
GETTING ORGANIZED
Remember, when seeking private hard money financing, source your insurance early in the process to secure favorable coverage, premiums, and on-time closing. For further guidance on the importance of Property & Casualty insurance.
For more information on our Hard Money Loans or Trust Deed Investments, call our office at 714.838.1474 ext. 102 or visit our:www.hanovermc.com