Construction Loans

Pending Disbursement Clause (Lenderís Policy)

Typically, a request is made to issue a loan policy in the full amount of the loan and, through successive draws, be updated through the date of each draw with the insured amount increasing by the amount disbursed on the loan until all work is completed and the final draw paid, at which time the insured amount of the policy reaches the full amount of the loan and the Amount of Insurance stated in the policy.  A loan policy given to insure a construction loan will be issued for the loan amount prior to the full disbursement of loan proceeds. Liability of the policy must be limited to the amount of the loan actually disbursed but allowed to increase as additional disbursements are made. This may be accomplished by inserting a pending disbursement clause, which may vary from state to state. Such clause limits the amount of liability of the insurer to the amount of funds actually disbursed up to the full amount of the policy.