Builder’s risk insurance


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    I’m doing a construction loan for a primary residence. Is it required to disclose the insurance premium on the LE and the CD
    There are some co-workers that say it is not required because the borrower has not started the construction of their home.
    The lending institution does require insurance.
    I have been disclosing the premium as paid outside of closing.
    Will you please see if you can help us with some clarification on this subject?
    Also does it matter if is disclosed as ‘builder’s Risk or homeowner’s. Some borrower get homeowner’s.
    Thank you very much

    Virginia Ellis


    Typically lenders require either a homeowners policy or a builders risk policy for a construction loan. Most lenders require that the coverage be in place at the time of closing. Some lenders do not require the coverage until construction actually begins. The amount of the premiums should be included in the Other Costs on the LE and the CD. The amount required to be paid at or before closing are included in Section F. – Prepaids. If the premiums for future periods are escrowed, the initial amount placed in the escrow is reflected in Section G. Premiums for insurance purchased after closing do not need to be disclosed on the LE or on the CD, but can be shown in an separate addendum attached to the LE or the CD.

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