Below is an excerpt from B7-3-03, Determining the Amount of Required Property Insurance Coverage (12/15/2021)
This topic contains information on determining the amount of required property insurance coverage for a property on which an individually held insurance policy is maintained.
Determining the Amount of Required Property Insurance #
The following table describes how to calculate the amount of required property insurance coverage:
|1||Compare the insurable value of the improvements as established by the property insurer to the unpaid principal balance (UPB) of the loan.|
|1A||If the insurable value of the improvements is less than the UPB, the insurable value is the amount of coverage required.|
|1B||If the UPB of the loan is less than the insurable value of the improvements, go to Step 2.|
|2||Calculate 80% of the insurable value of the improvements.|
|2A||If the result of this calculation is equal to or less than the UPB of the loan, the UPB is the amount of coverage required.|
|2B||If the result of this calculation is greater than the UPB of the loan, this calculated figure is the amount of coverage required.|
Note: Loan amount is used at the time of loan origination and UPB is used during servicing of the loan.
|Category||Property A||Property B||Property C|
|UPB||$95,000||$ 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|
Related Announcements #
The table below provides references to the Announcements that have been issued that are related to this topic.
|Announcement SEL-2021-11||December 15, 2021|
|Announcement SEL-2014–10||July 29, 2014|