THURSDAY, MAY 8, 2014
The requirements of "walls in" coverage stem from the fact that over the last 15 years mortgage service providers have been stuck with so many foreclosures and damaged units, with inadequate or no coverage, that they had to make some changes.
Walls in coverage(commonly referred to as HO-6) requires that the condo master policy include interior unit coverage. The condo master policy must include the replacement of improvements and betterments to cover improvements and betterments made by the condo owner. The bottom line is that the mortgage company will require the condo master to also cover the equivalent of an HO-6 or one will be required. Many times mortgage companies are requiring the HO-6 to cover 20% of the loan amount as added protection. For your client an HO-6 is always a good idea although it may not be required for the closing.
Some insurance companies do not have a definition for "walls in" and "walls out" and may be reluctant to put that language on a binder. If your client is in need of a condo master or an HO-6 you need to have them speak to someone that has the experience to recommend the right products to make your closing go smoothly. I have done many transactions like this and I can help your client with the correct coverage but also I can explain to them why they need it.