Insurance Required by Financiers: What It Covers and What It Costs

Required insurance is arranged quickly and paid for annually for the life of the facility. What it covers and where the cost varies.

Financiers require insurance because the property is their security. Borrowers typically accept whatever is arranged at completion and pay it annually thereafter without review, which makes it one of the most reliably overlooked recurring costs of ownership.

What this number does and does not include

This covers insurance arranged in connection with a property facility. It excludes contents insurance and any voluntary cover you arrange for your own purposes.

Building cover

Insurance of the structure against defined risks, protecting both you and the financier's security.

• Pushes it up: Higher rebuild values, certain construction types and locations with specific exposures.
• Brings it down: Insuring for rebuild cost rather than market value, which is what the cover should reflect.
• How to control it: Check whether the sum insured reflects rebuild cost. Insuring at market value can mean paying for cover you cannot use.

Cover required in connection with the facility

Any additional cover the financier requires as a condition, which varies by provider and product.

• Pushes it up: Larger facilities and longer terms.
• Brings it down: Comparing providers, since requirements differ.
• How to control it: Ask exactly what is required and whether you may arrange it independently, since provider-arranged cover is not always the cheapest.

Arrangement through the provider

The convenience of cover arranged at completion, usually with the premium added to the process.

• Pushes it up: Accepting the default arrangement without comparison.
• Brings it down: Obtaining independent quotations for equivalent cover.
• How to control it: Compare at least one independent quotation before accepting the default, and repeat at renewal.

Annual renewal

The recurring cost for the life of the facility, which is where the total accumulates.

• Pushes it up: Automatic renewal without review, which tends to drift upward.
• Brings it down: Reviewing annually and comparing alternatives.
• How to control it: Diarise the renewal date and review it as you would any recurring cost.

Costs that never appear on the first page

• Cover that continues after the facility is settled because nobody cancelled it.
• Premiums that drift upward at each automatic renewal without review.
• Gaps between policies when changing providers, leaving the property uninsured.
• Excesses that make small claims impractical while the premium continues.

Keeping the budget honest

Treat required insurance as a recurring cost to be reviewed annually, not as a one-off condition of completion. Over a long facility term, the difference between a reviewed and an unreviewed policy is a meaningful amount.

• At completion, comparing the default arrangement against an independent quotation.
• At each renewal, checking the premium and the sum insured.
• After any significant change to the property, such as an extension.
• On settlement of the facility, confirming what cover remains appropriate.

If you are weighing a financing decision, Domira can review the offers, model the total cost and stress test the obligation with you before you sign anything.