Lender has issue with specific verbiage with my insurance policy

Member since 2025 · 322 posts · 120 votes

My lender has issue with specific exclusion language on my policy, that the policy was over 100 pages long. The insurance broker said the exclusion was just for cosmetic things for roof. But lender's internal underwriting rejected that insurance.
I went to my primary house insurance company, but they don't deal with 4-plex.

I'm wondering if anyone has run into that issue before? What insurance company do you use for small multifamily?
I personally won't file insurance claim for anything under $10,000. So I'm looking for a policy that has a competitive price.

Thanks in advance for any insights!

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Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

7mo

Why don't you ask the bank if they have a list of insurance companies they deal with?

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Ken M.
Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
7mo
Quote from @Ying Tang:

My lender has issue with specific exclusion language on my policy, that the policy was over 100 pages long. The insurance broker said the exclusion was just for cosmetic things for roof. But lender's internal underwriting rejected that insurance.
I went to my primary house insurance company, but they don't deal with 4-plex.

I'm wondering if anyone has run into that issue before? What insurance company do you use for small multifamily?
I personally won't file insurance claim for anything under $10,000. So I'm looking for a policy that has a competitive price.

Thanks in advance for any insights!
Well, I'm told the wind blew through about 15 years ago and did about $1billion in damage in Phoenix. Maybe that's the problem.
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- Ying Tang
  OP
  Member since 2025 · 322 posts · 120 votes
  7mo
  @Ken M. A lot of them just don't want to deal with 2-4units I don't know why
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
7mo
Why don't you ask the bank if they have a list of insurance companies they deal with?
2 Reply
- Ying Tang
  OP
  Member since 2025 · 322 posts · 120 votes
  7mo
  @Theresa Harris I have a lender I work closely with and they are not a bank. My previous duplex deal with them was fine and insured by Statefarm. Statefarm don't do 4 units.
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- Scott WolfPro Member
  Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 958 votes
  7mo
  Quote from @Ying Tang:
  
  @Theresa Harris I have a lender I work closely with and they are not a bank. My previous duplex deal with them was fine and insured by Statefarm. Statefarm don't do 4 units.
  
  Below are two options built for landlords. Otherwise, google an insurance agent in your area for landlord insurance.
  https://www.obieinsurance.com/
  https://www.steadily.com/
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- Ying Tang
  OP
  Member since 2025 · 322 posts · 120 votes
  7mo
  @Scott Wolf Thank you! Steadily is the one they are having issue with. I'm gonna give Obie a try. Thanks again!
  1 Reply
- Scott WolfPro Member
  Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 958 votes
  7mo
  Quote from @Ying Tang:
  
  @Scott Wolf Thank you! Steadily is the one they are having issue with. I'm gonna give Obie a try. Thanks again!
  
  Wow, Steadily has a 100 page insurance policy? That seems aggressive for a 4 unit!
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- Erik EstradaBusiness Member
  Lender · Member since 2022 · 6k+ posts · 1k+ votes
  7mo
  Quote from @Ying Tang:
  
  @Scott Wolf Thank you! Steadily is the one they are having issue with. I'm gonna give Obie a try. Thanks again!
  
  Obie is solid. I usually recommend them to clients if they insure in the area. If not you can try Fortress Brokerage, but they are usually expensive
  [email protected]818-269-7983
  LuxePrivate Investments LLC 572 Reviews
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- Ying Tang
  OP
  Member since 2025 · 322 posts · 120 votes
  7mo
  @Erik Estrada Thanks!
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Owen RosenBusiness Member
Professional · Clinton Township, MI · Member since 2015 · 680 posts · 259 votes
7mo
Happy to help. That said, cosmetic exclusions/limits for roof or siding are not uncommon. Basically insurance companies don't want to replace an entire roof because some shingles don't perfectly match color due to color changes over time or exact availability.
Royal Oath Insurance Group4.9203 Reviews
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- Ying Tang
  OP
  Member since 2025 · 322 posts · 120 votes
  7mo
  @Owen Rosen Yeah. My lender told me penny Mac loan cannot accept that specific wording. The one I purchased has rolled roof and not even shingles. I'm wondering if insurance company can remove that term if I set my deductible high? And I don't plan to use insurance for anything under 10k.
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- Owen RosenBusiness Member
  Professional · Clinton Township, MI · Member since 2015 · 680 posts · 259 votes
  7mo
  Quote from @Ying Tang:
  
  @Owen Rosen Yeah. My lender told me penny Mac loan cannot accept that specific wording. The one I purchased has rolled roof and not even shingles. I'm wondering if insurance company can remove that term if I set my deductible high? And I don't plan to use insurance for anything under 10k.
  
  They won't be able to alter their forms in this way. You should speak with a broker that can work on your behalf.
  Royal Oath Insurance Group4.9203 Reviews
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Jim Johnson
Real Estate Agent · Memphis · Member since 2026 · 570 posts · 336 votes
7mo
This happens more often with small multifamily than people expect — lenders aren’t just looking at price, they’re looking at how the exclusions affect collateral protection.

Even if the broker says it’s “cosmetic roof only,” underwriting is asking a different question:
If there’s storm damage, is there any scenario where the lender’s security (the structure) isn’t fully covered? If the wording creates ambiguity, they’ll often reject it.

A few things that usually help:
- Ask the lender for the exact required endorsement or wording they need. Sometimes it’s very specific.
- Have your broker shop carriers that regularly insure 2–4 unit properties, not just single-family converted policies.
- Make sure the policy form matches the property type (DP vs. commercial package can matter).
- Confirm replacement cost language and roof settlement terms.
For 4-plexes, many owners end up with carriers that specialize in landlord or small multifamily policies rather than standard homeowners insurers.

The deductible strategy (like not filing under $10K) is fine from your side, but the lender’s concern is worst-case structural loss — not minor claims.

This is usually a wording and carrier fit issue, not a red flag on the property itself.
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- Ying Tang
  OP
  Member since 2025 · 322 posts · 120 votes
  7mo
  @Jim Johnson Thank you!
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