Insurance Requirements for Refinancing Your BRRRR Properties

The refinance is the critical "R" in BRRRR that allows you to recover your capital and repeat the process. But nothing derails a refinance faster than insurance problems.

Lenders have specific insurance requirements, and missing them can delay your closing — or kill the deal entirely.

Here's what you need to know.

Why Lenders Care About Insurance

When a lender provides financing, your property is their collateral. They want to ensure:

1. The property is protected against damage or loss 2. They get paid if something happens to the property 3. Liability exposure is adequately covered 4. The investment maintains its value

Insurance protects both you and the lender.

Standard Lender Insurance Requirements

1. Hazard/Property Insurance

What it covers: Physical damage to the building from fire, wind, hail, and other covered perils.

Typical requirements:

• Coverage amount ≥ loan balance OR replacement cost (whichever the lender specifies)

• Named perils or all-risk/open perils coverage

• Deductibles within lender limits (often max $5,000-10,000)

  2. Mortgagee Clause

  What it is: Language on your policy listing the lender as mortgagee (loss payee).

  Why it matters: Ensures the lender is notified of policy changes and receives claim payments.

  Format required: Lenders specify exact wording, typically:

``` [Lender Name] Its Successors and/or Assigns [Lender Address] Loan #: [Your Loan Number] ```

3. Liability Coverage

What it covers: Claims from injuries or damages on the property.

Typical requirements:

• Minimum $300,000-1,000,000 in liability coverage

• Some lenders require specific endorsements

• Commercial policies may have different requirements

  4. Declarations Page / Evidence of Insurance

  What it is: A summary document showing your coverage details.

  What lenders review:

• Named insured (must include property owner/borrower)

• Property address

• Coverage amounts

• Policy period (must extend past closing)

• Deductibles

• Mortgagee clause

  Additional Requirements by Lender Type

  DSCR Lenders

  Debt Service Coverage Ratio (DSCR) lenders are common for BRRRR investors. They typically require:

  - Landlord/rental dwelling policy (not homeowner's)

• Proof of rental income coverage

• Entity as named insured (if applicable)

• Sometimes: rent guarantee or loss of rents coverage

  Traditional Banks/Credit Unions

  More stringent requirements may include:

  - Replacement cost coverage (not ACV)

• Specific insurance rating for the carrier (A.M. Best A- or better)

• Annual policy (not month-to-month)

• Flood insurance if in flood zone

  Hard Money Lenders

  Requirements vary widely but often include:

  - Basic property coverage

• Mortgagee clause

• May accept builder's risk during rehab

• Less stringent on liability limits

  Portfolio Lenders

  For refinancing multiple properties:

  - Master policy acceptable

• Schedule of covered properties

• Per-property coverage allocation

• Blanket coverage documentation

  Common Insurance-Related Closing Delays

  Problem 1: Incorrect Mortgagee Information

  Issue: Lender name or address is wrong on the policy.

  Solution: Verify exact mortgagee wording with your lender before requesting the endorsement.

  Time to fix: 24-72 hours

  Problem 2: Coverage Amount Too Low

  Issue: Your policy doesn't meet the lender's minimum coverage requirement.

  Solution: Increase coverage limits before closing. May require updated appraisal or cost estimate.

  Time to fix: 1-3 days

  Problem 3: Wrong Policy Type

  Issue: You have a homeowner's policy on a rental property, or vacant property coverage when tenant is occupied.

  Solution: Switch to appropriate policy type. May require underwriting.

  Time to fix: 3-7 days

  Problem 4: Policy Expires Before Closing

  Issue: Your policy period ends during the loan process.

  Solution: Renew the policy or obtain a new one extending past expected closing.

  Time to fix: 1-5 days

  Problem 5: Deductible Too High

  Issue: Some lenders cap deductibles (e.g., max $10,000 or 5% of coverage).

  Solution: Lower your deductible. Will increase premium.

  Time to fix: 24-48 hours

  Preparing Insurance for Your Refinance

  Two Weeks Before Closing

  1. Confirm lender requirements — Get specific insurance requirements in writing

2. Review your current policy — Compare against requirements 3. Identify gaps — Note any changes needed 4. Contact your agent — Request necessary endorsements or changes

One Week Before Closing

1. Obtain updated declarations page — Showing all required elements 2. Verify mortgagee clause — Exact wording as specified 3. Confirm policy period — Extends past closing date 4. Send to lender/title company — Allow time for review

At Closing

1. Bring backup copies — Have extra copies of all insurance documents 2. Be prepared for last-minute requests — Underwriters sometimes add requirements 3. Have agent contact info handy — In case quick changes are needed

Insurance for Different Refinance Scenarios

Cash-Out Refinance on Stabilized Rental

You likely need:

• Landlord/rental dwelling policy (DP3)

• Liability coverage

• Loss of rental income

• Updated mortgagee clause

  Refinance After Rehab (Seasoning Period)

  You likely need:

• Transition from builder's risk to landlord policy

• Coverage reflecting improved property value

• Documentation of current condition

  Portfolio Refinance

  You likely need:

• Master policy or portfolio declarations

• Schedule showing all properties

• Per-property coverage amounts

• Single or multiple mortgagee clauses

  How We Help with Refinance Insurance

  We work with BRRRR investors every day and understand lender requirements inside and out.

  Quick Turnaround

  Need an endorsement by tomorrow? We understand the urgency of closing timelines.

  Lender-Ready Documentation

  Our declarations pages include all the information lenders need, formatted for easy review.

  Multiple Lender Experience

  We work with DSCR lenders, banks, credit unions, and hard money lenders across the country.

  Problem Resolution

  If a lender raises an insurance issue, we can usually resolve it same-day.

  Checklist: Insurance for BRRRR Refinance

  Before your refinance, confirm:

  - [ ] Policy type is correct (landlord/rental dwelling)

• [ ] Named insured matches borrower/entity

• [ ] Property address is correct

• [ ] Coverage amount meets lender minimum

• [ ] Liability coverage is adequate

• [ ] Deductible is within lender limits

• [ ] Policy period extends past closing

• [ ] Mortgagee clause has correct lender info

• [ ] Declarations page is current

  Get Refinance-Ready Coverage

  Don't let insurance slow down your next refinance.

  Get a free quote for lender-compliant coverage, or contact us to discuss your upcoming refinance.

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  Questions about insurance for your refinance? We specialize in helping BRRRR investors meet lender requirements quickly and efficiently.