B7-3-02, Property Insurance Requirements for One-to Four-Unit Properties (08/05/2026)

Property insurance policies for one- to four-unit properties securing loans purchased by Fannie Mae should be written on a "Special" coverage form or equivalent. At a minimum, the coverage must include the perils listed in the following table.

If a property insurance policy excludes or limits coverage of any of the required perils, the borrower must obtain an acceptable policy (e.g., stand-alone policy) that provides adequate coverage for the limited or excluded peril (see B7-3-05, Additional Insurance RequirementsB7-3-05, Additional Insurance Requirements, for additional information).

Coverage sufficiency for a property insurance policy for a one- to four-unit property is determined based on confirming the policy's loss settlement terms.

The property insurance policy must provide coverage on a replacement cost basis, with the exception of roofs; property insurance policies that provide such terms of coverage will be deemed to provide sufficient coverage. 

Roofs must be insured, but do not have to be insured on a replacement cost basis.

Note: Fannie Mae recognizes that some insurers may issue policies that provide coverage on an actual cash value basis for personal property and structures that are not buildings. In the event the lender or servicer sees such terms in a property insurance policy, this is acceptable.

See Servicing Guide B-2-01, Property Insurance Applicable to All Property Types, and B-2-02, Property Insurance Requirements for One- to Four-Unit Properties, for additional servicer responsibilities related to property insurance for second mortgages and minimum monitoring requirements.

The maximum allowable deductible for all required property insurance perils for one-to four-unit properties is 5% of the property insurance coverage amount.

If the property insurance policy includes separate deductibles for different required perils, such as windstorm or wildfire, each individual deductible must not exceed 5% of the property insurance coverage amount.

Additional requirements apply to properties with solar panels that are leased from or owned by a third party under a power purchase agreement or other similar arrangement. See B2-3-04, Special Property Eligibility ConsiderationsB2-3-04, Special Property Eligibility Considerations for additional requirements.

See B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation RequirementsB7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements for additional requirements applicable to a one- to four-unit property.