“Insurance Isn’t Optional — It’s a Private Lender’s Last Line of Defense”
Why I Told Anthony We Had to Expose the Insurance Gap Every Lender Needs to Know
February 3, 2026
By Jasmine Daya
Why Insurance Should Be on Every Private Lender’s Radar
In private lending, we talk often about interest rates, exit strategies, borrower strength, loan-to-value, and collateral protection. But one risk silently undermines every secured transaction if ignored: insurance coverage — or the lack of it.
When I partnered with Anthony Geraci, my background as a civil litigation lawyer handling all types of insurance claims — from personal injury and property damage to disability claims and professional negligence — immediately illuminated a blind spot in private lending: insurance risk isn’t being addressed until it’s too late. I told Anthony, “We need to bring this to the forefront to protect our clients.”
Private Loans Are Secured by Property — Until They Aren’t
Private lenders typically rely on the value of secured real property to recover in the event of default. But that recovery depends on the property actually retaining its value after loss.
If a covered event like wildfire, fire, windstorm, or another peril strikes — and insurance fails to adequately protect the collateral — a lender might be left foreclosing on a diminished asset with far less value than the outstanding loan balance.
That’s a worst-case scenario — and it’s happening more often than many lenders realize.
2025: A Wake-Up Call in California
The statistics speak for themselves:
- In 2025, over 42,000 insurance claims were filed in California for wildfire and related residential and commercial losses, with insurers paying out more than $22.4 billion on those claims.
- Earlier in the year, more than 31,000 claims were reported and billions were paid out as assistance to policyholders.
- These wildfire losses followed a record wildfire year and contributed to an environment where insurers are tightening underwriting and elevating premiums statewide. (California FAIR Plan coverage has doubled in risk exposure in recent years as private carriers pulled back from high-risk areas.)
- Denial rates in California for certain insurers — particularly surplus carriers — are above 66%, significantly higher than the national average of 37%.
California’s wildfire crisis isn’t just a headline — it’s a real and growing threat to property values, insurance availability, and secured collateral.
Claims Denials and Delays Are Common — Not Rare
Even when policies exist, they don’t always deliver the protection you think:
- Denial rates in California home insurance claims far exceed national norms — in some cases upward of two-thirds of claims rejected by certain carriers.
- Nationally, insurers denied an average of 37% of homeowners insurance claims in 2023, up from about 25% two decades ago — showing a long-term trend toward tighter claim handling.
- Processing catastrophic claims — like wildfire damage — often takes much longer than average timelines, with regulators recognizing delays and issuing advance-payment mandates to speed recovery.
Delays and denials don’t just hurt borrowers — they can shrink or destroy the value of the collateral lenders are relying on.
If Insurance Fails — What Is Left?
Imagine this scenario:
- A borrower defaults after a major insured event.
- The lender forecloses, but the property suffered significant damage that wasn’t fully covered.
- The fair market value of the property post-loss is far lower than the outstanding debt.
When a property’s value drops because insurance coverage was inadequate or mishandled, the lender may be left with:
- A diminished or partially destroyed asset
- Rebuilding costs exceeding remaining equity
- Litigation and marketing costs
- Lost interest and recovery below the loan balance
Contractual rights to foreclose are one thing — actual economic recovery is another. Without proper insurance protection, a lender’s security is fragile.
Why Geraci LLP Took Insurance Seriously
At Geraci LLP, we represent private lenders securing loans against real property. Over time, we repeatedly saw insurance gaps destroy what should have been “safe” collateral positions.
Because of my extensive litigation experience in insurance cases — including claims handling disputes, coverage denials, delayed payments, and bad faith conduct — it was obvious that insurance audit and claim representation services were not extras, but essential to protecting lender clients.
We expanded our practice to offer:
- Insurance policy audits for private lenders and property owners
- Representation for property damage claims when insurers delay, underpay, or deny coverage
This expansion wasn’t a sidestep — it was a natural extension of what must be done to protect collateral in today’s volatile risk environment.
Questions Every Lender Should Be Asking
Before closing a loan — and throughout the life of that loan — lenders should ask:
- Is the property actively insured with appropriate coverage limits?
- Are policies aligned with rebuild cost vs. outdated market value?
- Is the lender properly endorsed on the policy?
- Do vacancy exclusions or high deductibles jeopardize coverage?
- Are there flood, earthquake, or wildfire risks?
- Are policy renewals actively monitored?
Insurance is not a one-time checkbox. It’s a dynamic risk management tool that must be actively monitored and enforced.
The Bottom Line
A private loan secured by real property is only as safe as the protection surrounding that property. Insurance isn’t a formality — it’s a critical safeguard of value.
When insurance fails, lenders not only lose coverage — they can lose the very foundation of their collateral and recovery strategy.
That is why I told Anthony we had to expose the insurance issue — and why we continue to help our clients confront it head-on.
