Coinsurance issue with Lender for 5+ unit DSCR loan

[Arby Gharibian]

Hello,

I'm in escrow and provided the insurance quote to Lender but Lender is saying they do not accept Coinsurance in the insurance quote. Insurance Brokers can not find any insurance without coinsurance for 6 units multifamily. Need help please. what should I do

[Rod Hanks]

@Arby Gharibian

Hi Arby,

What your lender is referring to is the coinsurance clause that’s standard on most commercial property policies, especially once you get into multifamily (5+ units). A true “no coinsurance” policy for a 6-unit is very hard to find because carriers almost always require it.

The way around this is usually to have your broker add an Agreed Value endorsement. That basically waives the coinsurance penalty as long as the building is insured to full replacement cost, and in most cases it satisfies the lender’s requirement once they see the policy wording.

I’d suggest asking your lender specifically what language they need to see. Many times they’ll accept agreed value or proof of 100% replacement cost coverage.

Often, when we see a request like this we have a conversation with the underwriter to get an exception or workaround. Let me know if I may be able to help.