OPERATIONS MANUAL POLICY PROPERTY HAZARD INSURANCE REQUIREMENTS PROPERTY HAZARD INSURANCE INTRODUCTION Open Perils. 1.1.

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1 Section 1 PROPERTY HAZARD INSURANCE INTRODUCTION 1.1 Skyline Financial Corp. General Requirements Skyline Financial Corp. ( Skyline ) requires proof of protection against loss or damage from fire and other hazards along with proof of payment for the first year s premium. Borrowers may provide this proof in the form of a policy or binder. 1.1 Property Insurance Definition Property insurance (a.k.a. hazard insurance) provides coverage that compensates the property owner for physical damage to property by fire, wind, or other natural disasters. Property is insured in two main ways: Open Perils and Named Perils Open Perils Open Perils cover all the causes of loss not specifically excluded in the policy. Common exclusions on Open Peril policies include damage resulting from earthquake, floods, nuclear incidents, acts of terrorism, and war Named Perils Named Perils require the actual cause of loss to be listed in the policy in order for insurance to be provided. The more common Named Perils include such damage-causing events as fire, lightning, windstorm, hurricane, hail damage, civil commotion (including riots, smoke, damages caused by aircraft, vehicle or explosion), and theft. Polices that exclude named perils from coverage, in whole or in part are not acceptable. If any one of these perils is excluded from the primary insurance policy, coverage of the excluded peril must be obtained through a secondary insurance policy or endorsement, when those hazards are not uncommon to the locality. 1.1 Insurable Value Definition Insurable value, as established by the insurer is the cost to build the property improvements new. The dwelling plus other structures coverage will be used as insurable value Value Replacement Cost Estimate Definition The 360 Value Replacement Cost Estimate is a component-based estimating system utilized by property insurance companies that uses building cost databases to develop a brick-by-brick estimate of the cost to rebuild a property. Skyline uses the 360 Value Replacement Cost Estimate to establish the required amount of insurance needed to cover 100% of the value of the insurable improvements. Last Revision: 4/6/16 v1.0 Page 1 of 13

2 1.3 Coinsurance and Agreed Amount Endorsement Definition Coinsurance was introduced in the early 1900 s to prevent clients from under-valuing their property. Because the majority of property claims are partial losses, property owner would-under value their property to cover what they thought was the maximum potential loss. If the insurance client owned a $2 million building he/she would insure it for $500,000 to save money on insurance. The thought was $500,000 was most likely the worst-casescenario because total losses are rare. The only time a property owner would lose is if a total loss occurred. Agreed Amount Endorsement (a.k.a. Agreed Value and Agreed Amount) in a property insurance policy waives the coinsurance clause. In order to get the agreed value endorsement added to the insurance policy, the home owner must provide a signed statement of value and give it to the insurer. This endorsement typically adds 5% to property policy premium. 1.4 Types of Insurance There are several types of residential property hazard insurance policies, defined as follows: HO3 Insurance A typical homeowner s policy that covers all perils except those specifically excluded by the policy. It is a policy hybrid inclusive of coverage for both Open and Named Perils. HO6 Insurance Designed for project unit owners, the HO6 Condominium insurance covers damages to fixtures and upgrades a homeowner has made to the interior of the Condominium unit. It provides personal property coverage, liability coverage and specific coverage of improvements to the owner's unit. Master Insurance The master policy is not purchased by an individual, but by the Condominium Association, because Condominium units are part of a larger Condominium community. Each common element is communally insured against loss and liability through an insurance master policy. Section 2 PROPERTY INSURANCE REQUIREMENTS 2.1 Rating Requirements The property insurance policy for a property securing any first mortgage, including blanket policies for Condominium and PUD Projects, must be written by a carrier that meets the following rating requirements: Rating Agency Carrier Rating Description A.M. Best Co. B or better Financial Strength Rating in Best s Insurance Reports or A or better Financial Strength Rating and a Financial Size Category of VIII or greater in Best s Insurance Reports Non-US Edition Demotech, Inc. Standard and Poor s A or better rating in Demotech s Hazard Insurance Financial Stability Ratings. BBB or better Insurer Financial Strength Rating in Standard and Poor s Ratings Direct Insurance Service Note: The carrier needs to meet only one of the following rating categories, even if it is rated by more than one agency. Last Revision: 4/6/16 v1.0 Page 2 of 13

3 2.2 Insurance Requirements Skyline requires property hazard insurance coverage for all occupancy types. Skyline accepts the following forms as evidence of insurance: Declarations Page Certificate of Coverage Evidence of Property Insurance Insurance Binder Fair Access to Insurance Requirements (FAIR) Plans Note: An insurance quote or completed application for hazard insurance is not acceptable. Only the actual documentation from the insurance provider is considered proof of insurance. See Section 4 for Project Insurance requirements Fair Access to Insurance Requirements (FAIR) Plans Congress passed a law in 1968 authorizing states to establish the Fair Access to Insurance Requirements (FAIR) plans to assure that people in high risk insurance areas could get coverage (i.e.; high-crime area, frequent severe weather, etc.). These state-run insurance plans make property insurance available to those who cannot otherwise obtain it in the voluntary market. The associations that issue FAIR plans are nonprofit groups supported by private insurance companies operating in those states. The specifics of each plan vary from state to state, but all plans require licensed property insurers to participate in the pool and share in the profits and losses. Skyline accepts FAIR plans when no other insurance option is available. A few examples are listed below: State Fair Access to Insurance Requirements (FAIR) plan If it is the only coverage that can be obtained State insurance plan When that is the only insurance coverage available (i.e.; Hawaii Property Insurance Association (HPIA), Florida s Citizens Property Insurance Corporation, and other statemandated windstorm and beach-erosion insurance pools) Separate hurricane insurance policy issued by the Hawaiian Hurricane Relief Fund (for properties in Hawaii) Only if the companion non-catastrophic fire and extended coverage (or homeowner s) policy is obtained from a property insurer that satisfies the carrier rating criteria 2.3 Qualification The monthly cost of the insurance (including any HO-6) must be included in the Borrower s monthly qualifying PITIA. Additionally, when an escrow account (a.k.a. impound account) for insurance is established, it must include any HO-6 insurance. Earthquake insurance is not mandatory and therefore, not required to be included in the escrow account or qualifying ratios when applicable. Last Revision: 4/6/16 v1.0 Page 3 of 13

4 Section UNIT PROPERTIES INSURANCE COVERAGE 3.1 Coverage Types for 1-4 Unit Properties The types of insurance policies for 1-4 Unit properties are explained below Actual Cost Value Policy (a.k.a. Market Value Policy) An Actual Cost Value Policy, (a.k.a. Market Value Policy) covers the cost to replace damaged items at the depreciated value at the time of the actual insurance claim. The insurance company will determine depreciated value based on various factors such as age and wear-and-tear due to damage to the property. Skyline does not accept Actual Cost Value Policies (a.k.a. Market Value Policies) Replacement Cost Policy With a Replacement Cost Policy, if damage occurs to the property, the cost of replacement materials used is comparable to the cost of new materials of the same quality and used for the same purpose regardless of depreciation or appreciation. The limit put in place by the insurance company must be equal to or greater than the actual cost to replace damaged items. Although there are several additional replacement cost protection options available, two of the most common replacement policies acceptable to Skyline include: Guaranteed Replacement Cost Coverage (a.k.a. Full Replacement Cost or 100% Replacement Cost): Pays the full cost to rebuild the property before the covered disaster, regardless of policy limits. Extended Replacement Cost Coverage: Insures the property for a specified value as well as an additional 20-25% extended limit in case the costs for reconstruction are more than the actual cost value or replacement value. Example: If the coverage amount is $100,000 and the extended replacement cost percentage is 20%, the total insurance coverage is $120,000 ($100,000 x 20% = $20,000, $100,000 + $20,000 = $120,000). 3.2 Coverage Amount for 1-4 Unit Properties The amount of coverage for 1-4 unit properties not located in a Condominium or PUD Project must protect against loss or damage from fire and other hazards covered by the standard extended coverage endorsement. (Requirements for properties located in Projects are detailed in Section 4 Project Insurance Coverage below.) Skyline utilizes two methods to determine coverage and requires coverage equal to the lesser of the: Combined unpaid principal balance of the first and subordinate mortgages as long as it is at least 80% of the insurable value of the improvements required, compensating for damage or loss on a replacement cost basis or 100% of the value of the insurable improvements If the insurance coverage does not meet the criteria reflected above, then coverage that does meet the minimum required amount must be obtained through a new or secondary policy. Last Revision: 4/6/16 v1.0 Page 4 of 13

5 3.2.1 Combined Unpaid Principal Balance Method Since adequate insurance coverage for the combined unpaid principal balance method (inclusive of first and subordinate mortgages) must be at least 80% of the insurable value of the improvements the insurable value of the improvements must be verified using the following supporting documentation: Identified appraisal replacement cost value on Total Estimate of Cost New field in the Cost Approach section of the appraisal. Appraiser must state for insurance purposes. When two appraisals are required, use the highest Total Estimate of Cost New. Verification of the insurable value of the insurable improvements from the insurer, in the form of either: o o 360 Value Replacement Cost Estimate provided by the insurer or Skyline verbal verification with the insurer of adequate insurable value The Processor Certification to document the verbal verification of sufficient coverage must include: Date of call Insurance company name Agent name Phone number of insurance company/agency contact Policy number Whether replacement cost or adequate insurable value (for hazard) Name and title of Skyline employee that contacted the insurance agent Required Property Insurance Calculation for Combined Unpaid Principal Balance Method The following are the steps the Processor, Loan Coordinator, and Closing Specialist must follow when calculating the amount of property insurance required when using the unpaid principal balance method: Step 1 1A 1B 2A 2B Description Compare the insurable value of the improvements as established by the appraiser in Total Estimate of Cost New and property insurer to the unpaid principal balance of the mortgage loan. If the insurable value of the improvements is less than the unpaid principal balance, the insurable value is the amount of coverage required. If the unpaid principal balance of the mortgage loan is less than the insurable value of the improvements, calculate 80% of the insurable value of the improvements. If the result of the calculation in Step 1B is equal to or less than the unpaid principal balance of the mortgage, the unpaid principal balance is the amount of coverage required. If the result of the calculation in Step 1B is greater than the unpaid principal balance of the mortgage, the calculated figure is the amount of coverage required. Last Revision: 4/6/16 v1.0 Page 5 of 13

6 Required Property Insurance Calculation Examples for Combined Unpaid Principal Balance Method Category Property A Property B Property C Insurable Value $90,000 $100,000 $100,000 Unpaid Principal Balance $95,000 $90,000 $75,000 80% Insurable Value - $80,000 $80,000 Required Coverage $90,000 $90,000 $80,000 Calculation Method Step 1A Step 2A Step 2B % of the Value of the Insurable Improvements Method An insurance policy that includes the following endorsement ensures full insurable value replacement cost coverage under the 100% of the value of insurable improvements coverage option: Guaranteed Replacement Cost (a.k.a. Full Replacement Cost or 100% Replacement Cost) Endorsement AND, if the policy includes a coinsurance clause, an Agreed Amount Endorsement, which waives the requirement for co-insurance. An insurance policy that includes the following endorsement ensures full insurable value replacement cost coverage under the 100% of the value of insurable improvements coverage option ONLY when verification of insurable improvements have been provided by the insurer: Extended Replacement Cost Endorsement AND, if the policy includes a coinsurance clause, an Agreed Amount Endorsement, which waives the requirement for coinsurance Verification of 100% of the Value of the Insurable Improvements for Guaranteed Replacement Cost No additional verification of insurable improvements is required Verification of 100% of the Value of the Insurable Improvements for Extended Replacement Cost Verification of insurable improvements must be no less than the amount of coverage on the policy. Skyline accepts the following verification methods: 360 Value Replacement Cost Estimate provided by the insurer, or Skyline verbal verification with the insurer, replacement cost coverage, or adequate insurable value. The Processor Certification to document the verbal verification of sufficient coverage must include: o Date of call o Insurance company name o Agent name o Phone number of insurance company/agency contact o Policy number o Whether replacement cost or adequate insurable value (for hazard) o Name and title of Skyline employee that contacted the insurance agent Last Revision: 4/6/16 v1.0 Page 6 of 13

7 Note: The identified appraisal replacement cost value on Total Estimate of Cost New field in the Cost Approach section of the appraisal is not an acceptable method to determine the value of the insurable improvements when the insurance policy endorsement reflects Extended Replacement Cost. In this instance, the value of the insurable improvements may only be provided by the insurer as described above. 3.3 Policy Documentation Requirements for 1-4 Unit Properties Skyline may accept a short form certificate of insurance if the certificate shows all of the necessary information and is signed by the insurer. Handwritten changes to hazard insurance policies are not acceptable. A declarations page is part of the insurance policy and generally summarizes the coverage and policy limits. The policy or binder must include the: Policy number Name of the Insurance Company and Insurance Agency Insurance Agent s address and telephone number Signature of the licensed agent for the Insurance Company Name of Insured (Borrowers Names) as they will be taking title and matching with the names in the LOS Insured Property Address On purchase of new primary residence, the insured property and mailing address must both be the subject property address. In other instances (i.e.; second home and investment properties) where the mailing address is different from the subject property, both the property address and mailing address must appear on the policy. Effective dates of policy, which must be the same or prior to the date of signing/closing as evidenced by notary signature date Premium amount Dwelling coverage Deductible amount, which must not exceed Skyline s guidelines Skyline Mortgagee Clause Skyline Loan Number Rent Loss coverage (when applicable) 3.4 Policy Term for 1-4 Unit Properties The inception date of the policy must be no later than the date of loan closing. The term must be for a minimum of 12 months on purchase transactions and 90 days on refinance transactions. On insurance binders, the term must be for 90 days from loan closing. 3.5 Insurance Policy Payments for 1-4 Unit Properties The insurance policies for 1-4 unit properties must be prepaid or paid through escrow and meet one of the following specifications for proof of payment: Policy stating premium amount reflecting Paid in Full or $0 Due Last Revision: 4/6/16 v1.0 Page 7 of 13

8 A canceled check (copy of front and back) evidencing payment of outstanding premium A paid receipt reflecting Paid in Full or $0 Due from the Insurance Agent or Insurance Company Payment deducted and paid through close as reflected on the Closing Disclosure or HUD-1 Settlement Statement Purchase Policy Payments for 1-4 Unit Properties Purchase transactions require evidence that the first year s insurance premium has been paid outside of close or will be paid through close. If paid in advance, a signed paid received or cancelled check is required as evidence that the policy has been paid in full. If paid through close, the final Closing Disclosure must reflect the premium as paid to the Insurer. Skyline deducts the required amount of hazard insurance escrow from the wire amount to ensure sufficient funds are available to pay the premium when due on both refinance and purchase transactions Refinance Policy Payments for 1-4 Unit Properties Refinance transactions require a copy of the current policy with a minimum of 90 days remaining at closing. The policy should reflect Paid in Full or $0 Due. If there is an outstanding balance due, the outstanding amount must be paid (typically through close). On a refinance transaction, when an escrow account (also known as impound account) has been established and the insurance will expire in less than 90 days from closing, the escrow account will be set up to collect a full year of premium through close. However, the Borrower has the option to pay the year premium outside of close. On a refinance transaction, when an escrow account (also known as impound account) has not been established and the insurance will expire in less than 90 days from closing, the Borrower may pay a minimum of 90 days to extend the policy to show adequate days remaining. The Borrower may pay the premium outside of or through close. A 90-day binder is acceptable with a one year paid receipt when the Borrower does not have an impound account. 3.6 Maximum Deductible for 1-4 Unit Properties Unless a higher maximum amount is allowed by state law, the maximum allowable deductible for property insurance securing a first mortgage loan is 5% of the face amount of the policy. The maximum deductible includes common elements for Condominium and PUD Projects. If named perils such as fire or water damage are associated with separate deductibles, then each deductible may not exceed 5% of the dwelling's amount of coverage. 3.7 Solar for 1-4 Unit Properties For properties with solar panels that are leased from or owned by a third party under a power purchase agreement or other similar arrangement, the property insurance policy may not reflect the owner of the solar panels as either the Loss Payee or the person named as insured. Last Revision: 4/6/16 v1.0 Page 8 of 13

9 Section 4 PROJECT INSURANCE COVERAGE 4.1 Property Insurance Coverage Requirements for Projects This section outlines property insurance requirements for insurance policies that cover the common elements of Condominium Projects and some PUD Projects (considered a Project s blanket or master policy). This section also covers the insurance requirements for the individual unit. The insurance policy must at a minimum protect against fire and all other hazards that are normally covered by the standard extended coverage endorsement and all other perils customarily covered for similar types of Projects, including those covered by the standard all risk or special form endorsement. If the policy does not include an all risk or special form endorsement, Skyline will accept a policy that includes the broad form covered causes of loss. Skyline s requirements for PUD and Condominium Projects are detailed below Condominium Policy Requirements The Home Owners Association (HOA) must maintain a master or blanket insurance policy, with premiums paid as a common expense. The insurance policy must require the Insurer to notify in writing the HOA and each first mortgage holder at least 10 days before canceling or substantially changing coverage. All-In (a.k.a. All-Inclusive and Walls-In ) Policy: An All-In policy is a master policy that covers all of the Condominium common areas (grounds, pool, clubhouse, tennis courts, parking lot, exterior, etc.) and the individual units (interior walls, permanent fixtures such as cabinets, sinks, flooring, etc.). The master insurance policy must reflect the name of the unit owner (Borrower) and the subject property address with unit number (when applicable). The master insurance policy must include: Employee dishonesty and fidelity coverage equal to three months dues for all units Coverage all of the general and limited common elements normally included in coverage, such as: o Fixtures, building service equipment, and common personal property and supplies belonging to the HOA o Fixtures, equipment, and replacement of improvements and betterments that have been made inside the individual unit being financed Unit interior improvements that are not included under the terms of the All-In Policy type require an individual HO-6 policy with coverage, as determined by the Insurer, which is sufficient to repair the Condominium unit to its condition prior to a loss claim event. Bare Walls Policy: A Bare Walls policy is a master policy that covers all of the Condominium common areas often ending with the Condominiums outside walls. It typically provides no coverage for the unit interior, which includes fixtures, equipment, and replacement of interior improvements and betterments. The Bare Walls policy: Must include employee dishonesty and fidelity coverage equal to three months dues for all units. Requires the Borrower to obtain an additional individual HO-6 policy that provides coverage sufficient to repair the Condo unit to its condition prior to a loss claim event, as determined by the Insurer. Last Revision: 4/6/16 v1.0 Page 9 of 13

10 4.1.2 Betterments and Improvements The details included in the definition of betterments and improvements may vary by insurance carrier, but generally refer to permanent changes, alterations, or upgrades made to an individual unit. Further details and guidance should be obtained from the insurance agent to confirm that the HOA s master policy combined with the unit owner s HO-6 policy provides sufficient coverage to restore an individual unit to its condition prior to a loss claim event Amount of Coverage Skyline must use the best known/available information to determine whether the insurance coverage provided at the loan s origination is a reasonable representation of the condition of a property at closing. Examples to determine the reasonableness of coverage include, but are not limited to: An appraisal A replacement cost estimate performed by a third party or The original or updated Condominium unit specifications Policies with coinsurance provisions could create additional risk for an HOA in the event of a loss, if the amount of insurance coverage is less than the full insurable value. Master property policies that provide coverage at 100% of the insurable replacement cost of the Project improvements, including the individual units, alleviate the risk of a coinsurance penalty being applied in the event of a loss. If the policy has a coinsurance clause, Skyline considers inclusion of an Agreed Amount Endorsement or selection of the Agreed Value Option (which waives the requirement for coinsurance) acceptable evidence that the 100% insurable replacement cost requirement has been met. If an Agreed Amount/Agreed Value provision is used, the Agreed Amount must be no less than the estimated replacement cost. If the policy includes a coinsurance clause, but the coinsurance provision is not waived, the policy is still eligible if evidence that the amount of coverage is at least equal to 100% of the insurable replacement cost of the Project improvements. The insurance policy must meet the following requirements: The HOA carries a blanket insurance policy for the entire Project The common and limited elements must be insured to replacement cost The HOA must be insured for commercial general liability (CGL) and include: o o o The limit of liability must meet the minimum of $1 million per occurrence Building Ordinance of Law Endorsement Mechanical Breakdown Endorsement (a.k.a. Steam Boiler and Machinery Coverage Endorsement) required for projects with central heating or cooling. The amount of coverage per incident must equal the lesser of $2 million or the insurable value of the buildings housing the boiler or machinery. In Projects over 20 units, the HOA must be insured for fidelity or employee dishonesty. Last Revision: 4/6/16 v1.0 Page 10 of 13

11 4.1.2 Fidelity or Employee Dishonesty The Condominium HOA must maintain fidelity or employee dishonesty insurance covering losses resulting from dishonest of fraudulent acts committed by the HOA s directors, managers, trustees, employees, or volunteers who manage the funds collected and held for the benefit of the Condominium unit owners. A professional management firm must be insured to the same extent as an HOA that manages its own operation. The management firm must submit evidence of such coverage to the HOA. Fidelity or employee dishonesty insurance must have all of the following characteristics: The policy must name the Condominium HOA as the insured and premiums must be paid as a common expense by the HOA The coverage must equal no less than the maximum amount funds in the custody of the Condominium HOA or its management firm at any one time. A lower coverage limit is acceptable if the Condominiums Project Documents require the HOA and any management firm to adhere to certain financial controls. However, in such case, the coverage limit must at least equal the sum of three months of assessments on all units in the Project. Skyline accepts reduced fidelity or employee dishonesty insurance coverage based on greater financial controls if such controls include at least one of the following: The Condominium HOA or its management firm maintains separate accounts for the operating budget and the reserve fund. The depository institution in which funds are deposited sends copies of the monthly account statements directly to the HOA. Separate records and accounts are maintained for each Condominium HOA or other community association using the management firm's services. The management firm does not have the authority to draw checks on or to transfer funds from the reserve fund of the Condominium HOA. Two or more members of the HOA board of directors must sign any checks drawn on the reserve fund PUD Policy Requirements Planned Unit Development (PUD) units being insured individually must follow the requirements specified for 1-4 unit properties. The PUD project and the subject unit must meet all of the following applicable insurance requirements: The HOA must maintain a property insurance policy, with premiums being paid as a common expense. The policy must cover all of the common elements for 100% of their replacement cost except for those that are normally excluded from coverage, such as land, foundation, and excavations. Fixtures and building service equipment that are considered part of the common elements, as well as common personal property and supplies, must be covered. Individual insurance policies must be in place for each unit s mortgage. Note: If the Project s legal documents allow for blanket insurance policies to cover both the individual units and the common elements, Skyline will accept the blanket policies in satisfaction of its insurance requirements for the units. 4.2 HO-6 Insurance HO-6 coverage is required on any attached Condominium unit for which the master policy does not cover the components of the individual units, including betterments and improvements. The HO-6 policy is obtained by Last Revision: 4/6/16 v1.0 Page 11 of 13

12 the unit owner to ensure the personal content as well as interior improvements (i.e. interior walls, ceilings, electrical fixtures, air conditioner, heating equipment, water heater, built in cabinets, countertops, floor/wall coverings, etc.). The amount of coverage determined on the HO-6 policy is set by the Insurer. However, evidence of betterments and improvements must be contained in the policy. Additionally, the insurance policy should require the Insurer to notify in writing the HOA and each first mortgage holder at least 10 days before it cancels or substantially changes coverage. Note: Previous GSE requirements stating that 20% of the Condominium unit s appraised value be obtained are no longer applicable. 4.3 Ineligible Insurance Policies for Projects Skyline does not permit the following insurance policies: A blanket master insurance policy that covers multiple unaffiliated associations of projects. A master insurance policy that is a self-insurance arrangement where the owner s and/or unaffiliated associations have banded together to self-insure all of the common areas. 4.4 Maximum Deductible for Projects For policies covering the common elements in a PUD Project and for policies covering Condominium Projects, the maximum deductible amount must be no greater than 5% of the face amount of the policy. For losses related to individual PUD units that are covered by the blanket policy for the Project, the maximum deductible amount related to the individual unit must be no greater than 5% of the replacement cost of the unit. If, however, the policy provides for a wind-loss deductible (either in the policy itself or in a separate endorsement), that deductible must be no greater than 5% of the face amount of the policy. For blanket insurance policies that cover both the individual units and the common elements, the maximum deductible amount related to the individual unit should be no greater than 5% of the replacement cost of the unit. Section 5 RENT LOSS 5.1 Rent Loss for 1-4 Unit Properties Rent loss insurance is an insurance against a Landlord's loss of rent. Rent loss insurance protects a Landlord when a fire or other casualty damages the property so badly tenants can't occupy it and therefore, do not pay rent. In most cases, rent loss insurance covers damages to a Landlord's rental property as well as several months of lost gross rental income. Rent loss insurance may be designated as fair rental value or fair rental income under the general heading of loss of use or loss of rents. Generally, rent loss insurance pays the policy holder: For rental income lost due to the insured property being un-rentable by physical loss caused by peril and Only for such time needed to repair or replace the property or 12 months, whichever is shorter Last Revision: 4/6/16 v1.0 Page 12 of 13

13 Section 6 LOSS PAYEE 6.1 Loss Payee Information Skyline Financial Corp. must be named in the mortgage clause as follows: Skyline Financial Corp., a California Corporation Its Successors and/or Assigns Agoura Road, Suite 350 Calabasas, CA Last Revision: 4/6/16 v1.0 Page 13 of 13

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