Guide
Lender insurance requirements for commercial real estate
What lenders require, how Fannie Mae and Freddie Mac differ, and where to find the requirements in your loan.
The short answer
Most commercial lenders require property insurance at full replacement cost, capped deductibles, business income or rent loss coverage, general liability and umbrella, rated carriers, and the lender named as mortgagee, loss payee, and additional insured. Flood insurance is required in a FEMA Special Flood Hazard Area when the loan comes from a federally regulated lender. Fannie Mae and Freddie Mac loans follow published, more specific rules, and you can find yours in the insurance section of your loan agreement.
General information, not legal, tax, or coverage advice. What's covered depends on your specific policy wording, and the policy controls. Current as of September 2026.
Your lender owns a big piece of your property's risk, so your loan documents tell you how to insure it. Those requirements decide your limits, your deductibles, and which carriers can write you. Miss one and you can hold up a closing, get billed for force-placed insurance, or put the loan in default.
Most lenders ask for the same core coverage. Fannie Mae and Freddie Mac are the exception: their requirements are published, specific, and much harder to negotiate.
Typical requirements
What insurance do most lenders require?
Banks, life companies, debt funds, and CMBS lenders each write their own, but the core is consistent. The exact limits and deductible caps are negotiated deal by deal.
Property at replacement cost
Special form (all-risk) coverage at full replacement cost, not actual cash value. Lenders want the building rebuilt, not depreciated.
No coinsurance penalty
Either no coinsurance clause, or one offset by an agreed value endorsement, so an underinsured value can't cut the claim payment.
Capped deductibles
A maximum per-occurrence deductible, often with separate caps for wind, named storm, and earthquake.
Business income or rent loss
Coverage for lost income while the property is repaired, commonly 12 months, so the loan keeps getting paid.
Catastrophe perils
Wind and named storm where exposed, flood for buildings in a FEMA Special Flood Hazard Area, and earthquake or terrorism when the lender's risk review calls for it.
Ordinance or law and equipment breakdown
Coverage for code upgrades after a loss, and for boilers and mechanical systems.
Liability and umbrella
General liability with minimum per-occurrence and aggregate limits, plus umbrella or excess sized to the property.
Rated carriers
A minimum AM Best financial strength rating, commonly A- or better.
The right names and notice
The lender as mortgagee and loss payee on property, additional insured on liability, and advance written notice before any cancellation.
Flood is the one that isn't negotiable. Federal law requires flood insurance on buildings in a FEMA Special Flood Hazard Area when the loan comes from a federally regulated lender.
The exception
How strict are Fannie Mae and Freddie Mac insurance requirements?
Agency multifamily loans don't negotiate insurance deal by deal. The requirements are written into Fannie Mae's Multifamily Selling and Servicing Guide (Part II, Chapter 5) and Freddie Mac's Multifamily Seller/Servicer Guide (Chapter 31), and your servicer has to enforce them every year for the life of the loan.
They're also more specific than most lenders': hard dollar caps on deductibles, liability limits tied to unit count, and narrow, conditional paths to a waiver.
| Requirement | Fannie Mae | Freddie Mac |
|---|---|---|
| Carrier rating | Rating minimums apply | AM Best A- or better |
| Property limit | 100% of insurable value (90% for multiple buildings) | 100% of insurable value (90% for multiple buildings) |
| Coinsurance | None, or offset by agreed amount | None, or offset by agreed amount |
| Deductible, most perils | $50,000 under $10M IV; $100,000 at $10M+ | $50,000 under $10M IV; $100,000 at $10M+ |
| Deductible, blanket limit | $250,000 | $250,000 |
| Wind / hail deductible | Up to 5% of TIV | Up to 5% of TIV |
| Named storm deductible | Up to 7.5% of TIV | Up to 7.5% of TIV |
| Business income | 12 months actual loss sustained, or annual income basis | 12 months actual loss sustained, or 12 months of income |
| General liability | Required | $1M per occurrence / $2M aggregate, per location |
| Umbrella | Required | By unit count, from $1M (up to 250 units) to $20M (10,000+) |
Sources: Fannie Mae Multifamily Selling and Servicing Guide, Part II, Section 501.02B, effective September 28, 2026; Freddie Mac Multifamily Seller/Servicer Guide, Chapter 31, updated August 25, 2026. IV = insurable value; TIV = total insurable value. Both guides change often, so confirm against the current version and your loan documents.
Expanded deductibles are possible, with conditions. Both agencies allow a higher deductible ($100,000 under $10 million of insurable value, $150,000 above) only when a compliant policy isn't available and the borrower meets tests like liquidity of at least four times the deductible and no recent delinquency. Freddie Mac's waiver lasts one policy term and has to be renewed.
Coastal owners, watch the percentages. A 7.5% named-storm cap sounds generous until it becomes the only deductible a coastal market will offer. If you're near the Gulf, price the wind program against the agency cap before you commit to the loan. For how those programs get placed, see catastrophe and coastal property insurance. See also our wind deductible calculator, and our wind deductible buy-down guide if the cap is more than you can carry.
Check the limit, not just the deductible. A named-storm limit sized to a PML study can fail the agency test even when the deductible is well under the cap. Our agency named storm guide walks through the rules section by section. If a renewal increase threatens your debt coverage ratio, read what to do before the DSCR test. The commercial insurance rate barometer shows how much of an increase is market and how much is your account.
Why it matters
Why does meeting your lender's insurance requirements matter?
It's a loan covenant. Most loan documents make insurance compliance a condition of the loan. A gap can be treated as a covenant breach, and in serious cases a default.
Force-placed insurance is expensive. If your coverage lapses or falls short, the lender or servicer can buy a policy and charge you for it. Force-placed coverage protects the lender, not you, and it usually costs far more than a policy you buy yourself.
Closings stall. Lenders won't fund without compliant evidence of insurance. Finding a missing endorsement the week of closing is how deals slip. Our certificate of insurance guide covers what a certificate does and doesn't prove.
The lender controls the claim money. As mortgagee and loss payee, the lender is on the claim check. If your policy doesn't match the loan, expect a harder, slower path to getting repairs funded.
It usually protects you too. Replacement cost, no coinsurance penalty, and 12 months of rent loss are coverage you should want anyway. The requirements are a floor, not a ceiling.
Closing or refinancing
Closing or refinancing soon? Check your program against your loan first
Send us your current declarations and the insurance section of your loan agreement, and we will check the program against your lender's requirements before closing: limits, deductibles, business income, carrier ratings, and mortgagee and additional insured wording. You get a list of what matches and what needs to change. If the wind or named storm deductible is the sticking point, run it through the wind deductible calculator and read how Fannie Mae and Freddie Mac treat named storm deductibles.
A review is an analysis, not a binder. Nothing is bound until you approve it in writing and the carrier confirms.
Your documents
Where do you find your lender's insurance requirements?
The requirements are spread across several documents. Check them in this order.
Loan agreement
The main source. Look for a section titled Insurance, or Insurance and Casualty, and read the definitions it relies on.
Insurance exhibit or schedule
Many lenders put the detailed requirements in an exhibit at the back of the loan agreement: limits, deductibles, required endorsements.
Mortgage or deed of trust
Often repeats the insurance covenant and sets out how claim proceeds are handled.
Commitment letter or term sheet
Your earliest look. Requirements here usually carry into the final documents, so check them before you sign.
Closing checklist
Lender's counsel lists exactly what evidence of insurance it needs to close.
Servicer's annual compliance letter
After closing, the servicer checks coverage every renewal. Its request letter shows what it will enforce.
Searching a long PDF? Try these terms: insurance, casualty, deductible, mortgagee, loss payee, additional insured, rating, and flood.
Agency loans point to the guide. A Fannie Mae or Freddie Mac loan agreement often refers to the agency guide rather than listing every requirement. Ask your servicer for its current insurance requirements in writing.
Can't find them? Ask the lender or servicer directly. They would much rather answer now than chase you at renewal.
Checklist
Before you close, and every renewal
- Get the requirements in writing, from the loan agreement, its exhibit, or the servicer.
- Compare every requirement against your current policies, line by line, before renewal goes to market.
- Confirm deductibles, including wind and named storm percentages, are within the caps.
- Confirm the property limit meets the required percentage of insurable value, with no uncovered coinsurance clause.
- Check every carrier's rating against the minimum.
- Confirm the exact mortgagee and loss payee wording, and additional insured status on liability and umbrella.
- Deliver evidence of property insurance (ACORD 28) and liability certificates before the lender's deadline.
- If something can't be met, ask for a waiver early, in writing. Don't let the servicer find it.
FAQ
Common questions about lender insurance requirements
What insurance do commercial lenders require?
Typically property insurance at full replacement cost on a special form, no coinsurance penalty, capped deductibles, business income or rent loss, flood in FEMA flood zones, general liability and umbrella, carriers rated A- or better, and the lender named as mortgagee, loss payee, and additional insured.
What are Fannie Mae's maximum deductibles for multifamily?
Under Fannie Mae's Multifamily Selling and Servicing Guide (effective September 28, 2026), the per-occurrence maximum for most perils is $50,000 for properties under $10 million of insurable value and $100,000 at $10 million or more, or $250,000 on a blanket limit. Wind and hail can go up to 5% of total insurable value, and named storm and earthquake up to 7.5%.
How much umbrella coverage does Freddie Mac require?
Freddie Mac's Multifamily Guide requires $1 million per occurrence and $2 million aggregate in general liability, plus umbrella or excess based on units: $1 million up to 250 units, $2 million for 251 to 500, $3 million for 501 to 1,000, $5 million for 1,001 to 2,000, and more above that.
What happens if my insurance doesn't meet my lender's requirements?
Most loan documents treat it as a covenant breach. The lender or servicer can demand a fix, buy force-placed insurance and charge you for it, or in serious cases call a default. At closing, it can delay funding.
Where do I find my lender's insurance requirements?
Start with the insurance section of your loan agreement and any insurance exhibit attached to it. The commitment letter shows the requirements before closing, and the servicer's annual compliance letter shows what it enforces after.
Can I get a waiver from my lender's insurance requirements?
Sometimes. Portfolio lenders can often negotiate. Fannie Mae and Freddie Mac allow expanded deductibles only when specific conditions are met, such as borrower liquidity of at least four times the deductible, and Freddie Mac's waiver lasts one policy term at a time.
Working with us
Send us your loan documents
We read the insurance section of your loan before we market your program, so the coverage we bind is coverage your lender accepts. That goes for bank, life company, CMBS, and agency loans.
Heading into a closing or refinance? Send us the commitment letter. We'll tell you what it requires and whether your current program meets it. See also real estate portfolio insurance and multifamily insurance. Section 8, HUD, and LIHTC loans carry extra requirements; see affordable housing insurance.
Loan officer or mortgage broker? We run the same insurance compliance check for your borrower, free, and send it back within one business day.
This article is for general educational purposes only. It isn't legal, tax, accounting, or lending advice and doesn't create a producer–client relationship. Policy terms, exclusions, and availability vary by carrier, state, and property. Only the policy actually issued determines coverage. Regulatory and lender requirements change; confirm current rules with your attorney, lender, or servicer before relying on anything here.
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