What is an agreed amount endorsement and how does it protect apartment owners?

An agreed amount endorsement (ISO CP 00 30 or equivalent proprietary form) is a property insurance endorsement that suspends the coinsurance clause for the duration of the policy term. Under the endorsement, the insurer and the apartment owner agree on the insured value of the building based on a statement of values submitted by the owner. As long as the coverage amount meets or exceeds the agreed amount shown on the endorsement, no coinsurance penalty applies to partial loss claims.

This endorsement is critically important for apartment owners because a coinsurance penalty can dramatically reduce claim payouts. Without the endorsement, an owner who inadvertently underinsures the building relative to the coinsurance requirement (typically 80% to 100% of replacement cost) will have every partial loss claim reduced proportionally per the ISO CP 00 99 coinsurance formula.

Fannie Mae's Multifamily Selling and Servicing Guide requires either no coinsurance clause or an agreed amount endorsement for all DUS loans. Freddie Mac's Seller/Servicer Guide requires a coinsurance clause of no less than 90% or an agreed amount endorsement. HUD's MAP Guide similarly requires adequate property valuation provisions. The agreed amount endorsement is the preferred solution because it eliminates coinsurance risk entirely rather than simply setting a high coinsurance percentage.

To maintain the endorsement, the owner must submit an updated statement of values at each policy renewal. If the statement of values is not updated and the endorsement lapses, the coinsurance clause is automatically reinstated. Apartment owners should work with their broker to ensure the statement of values reflects current construction costs, which can change significantly year over year during periods of construction cost inflation.