# Construction Loan Insurance Requirements: Reading the Lender's Exhibit URL: https://mycontractorsinsurancequote.com/resources/lender-insurance-requirements Updated: 2026-10-29 · Reviewed by the Principal, Gleason Insurance Brokers, LLC Publisher: My Contractors Insurance Quote, a website of Gleason Insurance Brokers, LLC A construction lender's insurance exhibit asks the borrower to prove that the collateral is insured for the lender's benefit and that the people building it carry liability insurance the loan agreement can rely on. In practice that means builders risk with the lender named under a mortgagee or loss payable clause, liability and excess limits set by the loan documents, notice of cancellation and evidence on the forms the lender accepts. Every line should be matched to an issued policy page, endorsement or bond before closing, not to a certificate alone. ## Key Decision Points - The loan agreement sets the limits; no limit on this page is a default or a recommendation. - Lenders take a property interest on builders risk and a liability interest on GL; the wording differs. - A certificate reports coverage; only the policy and its endorsements change it. - A sponsor completion guaranty and a contractor's performance bond are different promises to different parties. - Map every exhibit line to a document before closing and get written variances for the rest. ## What the Lender's Exhibit Is Protecting A construction loan is secured by a building that does not exist yet. Until it is finished, the lender's collateral is a partly built structure, materials on site and in transit and the borrower's right to complete the work. The insurance exhibit is how the lender makes sure a fire, collapse or major liability claim does not leave it holding a damaged asset and an insolvent borrower. Each requirement traces back to one of those risks. Most exhibits are lender templates written for many deals at once. That is why they can ask for wording a particular insurer does not issue, or reference coverage that makes little sense on a ground-up project. Treat the exhibit as a list of requirements to answer one by one, and expect to negotiate a few. The sooner the draft exhibit reaches the broker, the more room there is to place coverage that fits it or to ask the lender for a written change. The exhibit is one layer of the wider program covered under [insurance and bonds for developers and subdividers](https://mycontractorsinsurancequote.com/who-we-serve/developers-subdividers). ## Builders Risk with a Mortgagee or Loss Payee Clause Builders risk is usually the line the lender cares about most, because it insures the collateral itself. Exhibits commonly ask for replacement-cost values, the lender named under a mortgagee clause or as lender loss payee, and sublimits for materials in transit and in off-site storage. Some also ask for soft-cost and delay coverage, so that interest and carrying costs are funded if a loss pushes back completion. Whether a given form responds to each of these depends on the form and its endorsements. A mortgagee or loss payable clause is a property concept: it puts the lender in line for loss payments on the insured property and, depending on the wording, may protect the lender's interest even when the borrower breaches a policy condition. That is different from additional insured status, which is a liability concept. One published example of a lender standard, HUD's insurance appendix for its hospital mortgage insurance program, asks for both a mortgagee clause and a loss payable clause acceptable to HUD, and it expects builders risk to be replaced by permanent property insurance as buildings are completed. - Confirm the lender's exact legal name and address for the clause, including any "its successors and assigns" language. - Match the insured values to the loan budget: hard costs, soft costs and any existing structures. - Check how partial occupancy or early turnover is treated before a tenant or buyer moves in. For the coverage mechanics behind these lines, see [how builders risk values and insured interests work](https://mycontractorsinsurancequote.com/builders-risk-insurance). ### Illustrative scenario: A Multifamily Loan Exhibit with Mismatched Wording A sponsor closing a construction loan on a four-story podium apartment building receives a lender exhibit that asks for the lender as additional insured on builders risk and as mortgagee on the general liability policy, the reverse of how those statuses usually work. The exhibit also asks for notice of cancellation on every line and a completion guaranty from the sponsor. The broker maps each line: the builders risk form can name the lender under a lender loss payable clause and evidence it on an ACORD 28; the GL insurer will issue an additional insured endorsement for the lender but will not endorse third-party notice, which goes to the lender as a written variance request. The GC's performance bond is offered with a rider adding the lender as an obligee, subject to the surety's conditions. The sponsor's completion guaranty stays a separate obligation between sponsor and lender. ## Liability, Excess and Additional Insured Requests On the liability side, the exhibit typically asks the borrower and the general contractor to carry general liability and excess or umbrella limits set by the loan agreement, and to name the lender as an additional insured. Many also ask that the GC's limits apply per project, so that claims on the contractor's other jobs cannot exhaust the aggregate protecting this site. The required amounts vary by lender, project size and contract. The loan documents control. Additional insured status on a GL policy is created only by an endorsement, and endorsements differ in scope: ongoing versus completed operations, "caused in whole or in part by" language and whether coverage is primary and noncontributory. A project-specific policy or a wrap-up can simplify the answer, because the lender sees one program for the site instead of a stack of contractor certificates. Ask whether the policy offered carries the endorsement the exhibit names, and get the form number. When the lender wants limits that belong to this site alone, review [project-specific liability and dedicated limits](https://mycontractorsinsurancequote.com/project-specific-liability-insurance). ## Notice of Cancellation and Why It Differs by Line Lenders want to hear about a cancellation or a reduction before it takes effect, not after a loss. ACORD's certificate guidance explains the mechanics: a property policy typically obligates the insurer to notify the mortgage holder if the policy is canceled, while a typical liability policy obliges the insurer to notify only the first named insured unless the policy is endorsed to notify someone else. That difference is the reason ACORD publishes separate property and liability certificates. So a notice requirement on the property side may be met by the mortgagee clause itself, while the same requirement on GL or excess usually needs a notice endorsement, if the insurer will issue one. The HUD appendix, for example, asks for advance notice to the lender and HUD before any reduction or cancellation, with a shorter period for nonpayment. Where an insurer will not endorse notice to a third party, document that and ask the lender for a written alternative rather than letting a certificate imply it. ## ACORD 28, ACORD 25 and What Counts As Proof Lenders usually ask for evidence on specific ACORD forms. ACORD lists the ACORD 28 as Evidence of Commercial Property Insurance and the ACORD 25 as the Certificate of Liability Insurance. ACORD explains that its 27 and 28 forms are certificates designed for parties with a financial interest in the insured property, typically lenders, which is why they carry the word "Evidence" in the title. Builders risk and permanent property usually go on the 28; GL, excess and auto on the 25. Neither form is the policy. ACORD states that a certificate does not provide, amend, extend or alter coverage. It adds that a reference to a contract on a certificate does not create coverage. Some lenders go further: the HUD appendix accepts an ACORD 28 with an ACORD 25 only as temporary evidence and wants the complete policy for its permanent file. Plan for the lender to ask for policy copies and endorsements, not just the forms. To build the file a lender will ask for, start with the [documents to gather before a quote request](https://mycontractorsinsurancequote.com/resources/project-insurance-checklist). ## Completion Guaranties and Performance Bonds Are Not the Same Construction lenders usually want more than insurance; they want assurance the project gets finished. Two tools answer that differently. A completion guaranty is the sponsor's own contractual promise to the lender to complete the work or fund the shortfall. A performance bond is a surety's promise to the obligee, usually the owner, that the contractor will perform the contract. Surety is not insurance: the bond protects the obligee, and the contractor and its indemnitors owe the surety reimbursement for any loss it pays. When a lender wants the protection of the GC's performance bond, it may ask to be added as an obligee through a rider, so it can step in if the owner-borrower defaults. Sureties may agree, often with conditions tied to the owner's payment obligations. A payment bond answers a related lender concern, unpaid subcontractors and suppliers who might otherwise file liens against the collateral. How each instrument interacts with the loan is a question for counsel and the surety, not the certificate. For the bond side of the project, read [how contract surety bonds work for owners and lenders](https://mycontractorsinsurancequote.com/construction-surety-bonds). ## When a Wrap-Up Changes the Exhibit If the developer sponsors an owner-controlled insurance program, the lender is looking at one liability program for the site instead of a certificate from every subcontractor. That can make the exhibit easier to satisfy, but it also shifts the evidence burden to the sponsor: enrollment records, the excluded parties and the completed operations term all become questions the lender may ask. Contractors who are excluded from the wrap still need their own coverage and certificates. A contractor-controlled program raises the same questions from the other direction, because the borrower depends on the GC to maintain it. In either case, ask the lender early whether its exhibit was written with a wrap in mind; many templates assume traditional contractor insurance and need a written adjustment. For how owner and contractor programs are structured, see [OCIP and CCIP wrap-up programs](https://mycontractorsinsurancequote.com/wrap-up-insurance). ## When a Public Agency Also Finances the Project Affordable and HUD-insured multifamily projects add a public agency's requirements to the construction lender's exhibit. HUD, state housing finance agencies and tax credit allocators can set their own builders risk wording, liability limits, completion assurance and contractor fee rules, and the strictest term on each line usually controls the program. Those agency terms are set out under [affordable housing construction insurance and bond requirements](https://mycontractorsinsurancequote.com/projects/affordable-housing-construction). ## A Compliance Matrix Before Closing The practical tool is a matrix with one row per exhibit requirement: the line of coverage, the limit or wording requested, the document that satisfies it (policy page, endorsement form number or bond rider) and the status. Rows with no matching document become open issues for the borrower, lender and insurer to resolve in writing. That record keeps a certificate from implying more than the policy says and gives the lender's insurance reviewer a clean file. Keep dates in the same matrix. Builders risk effective dates should line up with the loan closing and the start of work, and the expiration should leave room for schedule slip; extensions are easier to arrange before a policy lapses than after. ## Before You Ask for a Quote ### What to Gather - The lender's insurance exhibit and the loan agreement sections that reference it - Exact legal names of the borrower, sponsor, lender and any co-lenders or servicers - The construction budget split into hard costs, soft costs and existing structures - The owner-contractor agreement's insurance and bond requirements - The project schedule, including expected partial occupancy and completion dates - Any wrap-up enrollment documents or the GC's current certificates and endorsements ### What to Ask the Insurer or Surety - Which mortgagee or loss payable wording will the builders risk form carry, and can I see it? - Will the liability insurer issue the additional insured and notice endorsements the exhibit names? - Are the GL limits dedicated to this project or shared with the contractor's other work? - Does the builders risk form restrict partial occupancy or testing, and what extension is available? - Will the surety consider a rider adding the lender as an obligee, and on what conditions? - Which exhibit lines cannot be met as written, so we can request a written variance? ## Broker Notes **Quick Answer:** Construction lenders typically require builders risk naming the lender under a mortgagee or loss payable clause, liability and excess limits set by the loan agreement with the lender as additional insured, notice of cancellation and evidence on ACORD 28 and ACORD 25 forms. **Common Mistake:** Treating a certificate as proof the exhibit is satisfied. A certificate reports coverage and cannot add an endorsement, so a lender reviewer who later reads the policy may find gaps the certificate hid. **Broker Perspective:** Get the draft exhibit before the term sheet is final, map every line to a policy page or endorsement form and send the lender a written list of variances instead of waiting for its insurance reviewer to find them. **Coverage Impact:** Lender requirements often drive the builders risk values, the endorsements on liability and the bond riders on the contract. The result depends on what each insurer and surety will issue, which can differ from the template wording. ## Questions Buyers Ask ### Should the lender be a loss payee or an additional insured? Usually both, on different policies. On builders risk and permanent property, the lender is typically named under a mortgagee or lender loss payable clause, which concerns who receives property loss payments. On general liability and excess, the lender may ask to be an additional insured, which concerns defense and indemnity for claims. Mixing the two up on an exhibit or a certificate is a frequent source of closing delays, so ask the broker to confirm which status each policy carries. ### Which ACORD form does a construction lender want for builders risk? Most lenders ask for the ACORD 28, Evidence of Commercial Property Insurance, for builders risk and permanent property, and the ACORD 25, Certificate of Liability Insurance, for liability lines. Both are informational only. Some lenders treat them as temporary evidence and still ask for the full policy and endorsements after closing, so plan to provide those too. ### Does a sponsor completion guaranty replace the contractor's performance bond? No. A completion guaranty is the sponsor's own promise to the lender, backed by the sponsor's balance sheet. A performance bond is a surety's promise to the obligee that the contractor will perform, and the contractor owes the surety indemnity for any loss. Lenders may ask for one, the other or both, depending on the sponsor's strength and the contractor's bonding. ### What if our insurer will not issue a wording the lender demands? Document it rather than paper over it. Ask the insurer for its written position, see whether another market or endorsement can meet the intent, and send the lender a short variance request explaining what is available. Lenders often accept a reasonable alternative when it is raised before closing, and they are far less flexible when a gap turns up during a draw review. ## Official Sources 1. [ACORD, Certificates of Insurance: Frequently Asked Questions](https://www.acord.org/docs/default-source/forms/acordcertificatesfaq), ACORD. ACORD 25 is the Certificate of Liability Insurance and ACORD 28 is Evidence of Commercial Property Insurance; 27 and 28 are designed for parties with a financial interest in the property, typically lenders; a certificate does not provide, amend, extend or alter coverage; property policies typically notify the mortgage holder of cancellation while liability policies notify only the first named insured unless endorsed. Verified 2026-10-23. 2. [HUD Handbook 4615.1 REV-1, Appendix 7 (Insurance Requirements)](https://www.hud.gov/sites/documents/46151x7hsgh.pdf), U.S. Department of Housing and Urban Development. Example of a published lender insurance standard: mortgagee and loss payable clauses acceptable to HUD, advance notice to the lender and HUD before reduction or cancellation, ACORD 28 with ACORD 25 as temporary evidence only, complete policies as permanent evidence, and owner-procured builders risk replaced by commercial property as buildings are completed. Verified 2026-10-23. ## Related Decisions - [fronting carriers and collateral](https://mycontractorsinsurancequote.com/resources/captive-fronting-and-collateral) - [developer and subdivider insurance](https://mycontractorsinsurancequote.com/who-we-serve/developers-subdividers) - [builders risk for ground-up projects](https://mycontractorsinsurancequote.com/builders-risk-insurance) - [performance bonds and obligee rights](https://mycontractorsinsurancequote.com/construction-surety-bonds/performance-bonds) - [project risks at each construction phase](https://mycontractorsinsurancequote.com/resources/project-risks-by-construction-phase) - [multifamily construction insurance](https://mycontractorsinsurancequote.com/projects/residential-construction) --- Start a quote request: https://mycontractorsinsurancequote.com/get-a-quote · Call 844-978-7283 Contract and insurance reviews are a courtesy service that may be available at times, depending on our workload and on the size, timing and complexity of the project. A review is not guaranteed and is limited to insurance considerations. It is not legal advice and is not a substitute for advice from your own legal counsel, which you may need before signing a contract or obtaining coverage. Insurance and surety services are provided through Gleason Insurance Brokers, LLC. Site information is educational and does not constitute legal advice, a binder, an offer of coverage, a guarantee of eligibility or confirmation of policy terms. Insurance conditions are governed by actual issued policies; surety rights and obligations are governed by bond and indemnity documents.