b'The Hazards of Hazard InsurancebyEd BabtkisRoss Diversified Insurance Servicesazard insurance, or fire insurance,Actual Cash Value (not Replacement Cost).Lenders should also have an account with is one of the most rudimentaryHaving a FAIR Plan policy still requiresan insurance agency set-up in order to loss-mitigators for lenders andborrowers to obtain a second policy toquickly acquire Lender-Placed Insurance borrowers to protect their investment incover all other risks.as a last resort to protect the property real property. But what happens whenif the borrower cannot obtain their own that piece fails to protect from one ofHow do lenders keep up with theseinsurance policy. Lender-placed, or force Californias most common perils, fire?changes? The first step for lendersplaced, insurance is insurance of last-Between 2017-2018 over $26 Billion inis to make sure that their insuranceresort for lenders. It is typically more wildfire-related insurance claims were paidrequirements at origination are clear andexpensive than if a borrower obtains their by insurers. In 2019 there were more thancomplete. At minimum, the requirementsown insurance policy and is often less 46,000 wildfires and over 2 million homesshould include: comprehensive. However, it is a necessary in California are considered to be in high List hazards required to be covered tool in a lenders toolbox to protect a or extreme fire risk areas. This number isproperty that is not insured.expected to grow as more and more new Amount of insurance equal to housing communities are sprouting up inreplacement cost of building(s)high-risk areas such as San Diego, Temecula Deductible of no more than 5% ofRoss Diversified Insurance Services is and Marin county.loan licensed in all 50 states and works with Loss of Rents Endorsement if rental over 500 lenders/servicers and over 3,000 How do insurance companies respond toinvestors insuring thousands of properties these losses and growing risks? Typically, Builders Risk Endorsement if fix/flip located throughout the United States. by non-renewing insurance, not accepting Carrier should have AM BestNo property is too small; no portfolio is new policies in fire-prone areas or outrightFinancial Rating of B or better too large. We operate under one simple omitting fire insurance altogether in theirphilosophy: find the right real estate policies. This leaves borrowers scramblingThese insurance requirements should carryinsurance coverage for lenders, borrowers for insurance and lenders in the dark as toover to the servicing of the loan throughout& portfolio managers at the lowest possible whether their collateral is appropriatelythe life of the loan. If an insurance policyrate tailored to each clients specific needs.insured.Borrowers can turn to Californiasis non-renewed, lenders should be able FAIR Plan, last-resort option for borrowersto provide to their borrowers a trustedContact Info: Ross Diversified Insurance funded by Californias insurers that onlyinsurance agency as a recommendation.Services www.RossDiv.com (800) 210-7677 covers fire-related damages, usually atsbrust@ross2.com.Points of InterestSpring 2020Page 19'