source:
  type: guide
  id: hud-4000-1-iii-h-insurance-coverage-administration
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — h. Insurance
    Coverage Administration (10/01/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — h. Insurance
    Coverage Administration (10/01/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-h-insurance-coverage-administration-full
  canonical_id: hud-4000-1-iii-h-insurance-coverage-administration-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — h. Insurance
    Coverage Administration (10/01/2025)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — h. Insurance
      Coverage Administration (10/01/2025)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'h. Insurance Coverage Administration (10/01/2025) i. Hazard
      Insurance If the Mortgagee requires the Borrower to purchase Hazard Insurance,
      the Mortgagee must: • allow Borrowers to choose their own hazard insurance company;
      • be named as a “Loss Payee” on the hazard insurance policy; and • escrow sufficient
      funds for the payment of a renewal premium. (A) Payment of Renewal Premium When
      the Mortgagee has required the Borrower to purchase Hazard Insurance, the Mortgagee
      must escrow for premium payments and pay renewal premiums by: • remitting the
      renewal premium from available escrow funds; or • where insufficient escrow
      funds exist, advancing corporate funds for the payment of the renewal premium.
      The Mortgagee must not require more coverage than is necessary to protect its
      investment. The Mortgagee must escrow renewal premiums for the entire amount
      if the Borrower chooses to insure the Property for more than the minimum amount.
      (B) Fee for Change in Hazard Insurance Policy The Mortgagee may assess a reasonable
      and customary fee, up to the amount listed in Appendix 3.0, for processing the
      Borrower’s request to change hazard insurance coverage when the existing policy
      has not yet expired. ii. Flood Insurance (A) Standard The Mortgagee must review
      all Properties annually to determine if the Property is located within a Special
      Flood Hazard Area (SFHA). For Properties located within an SFHA that are required
      to carry Flood Insurance, the Mortgagee must: • ensure that Flood Insurance
      is in force for the life of the Mortgage; and • review annually that the Property
      carries sufficient Flood Insurance. (B) Required Documentation The Mortgagee
      must include updated Flood Insurance information for Properties where Flood
      Insurance is required in the Servicing and Claims File. III. SERVICING AND LOSS
      MITIGATION A. Title II Insured Housing Programs Forward Mortgages 1. Servicing
      of FHA-Insured Mortgages Handbook 4000.1 1170 Last Revised: 11/26/2025 iii.
      Hazard or Flood Insurance Proceeds (A) Insurance Claims The Mortgagee must take
      necessary steps to ensure that hazard or flood insurance claims are filed and
      settled as expeditiously as possible. (B) Loss Settlement Amounts for Borrower
      Expenses and Personal Property The Mortgagee must promptly release to the Borrower
      all insurance settlement proceeds received for coverage of a Borrower’s Personal
      Property, temporary housing, and other transition expenses. The Mortgagee may
      not withhold Disbursement of such proceeds to cover an existing arrearage without
      the written consent of the Borrower. (C) Insurance Proceeds for Home Damage
      (1) Definition A Viable Repair Plan is a plan for repairs of a mortgaged Property
      within the amounts available through insurance proceeds and borrower funds.
      (2) Standard The Mortgagee must expedite the release of insurance proceeds for
      needed home repairs after approving a Viable Repair Plan. (D) Application of
      Insurance Proceeds to Unpaid Principal Balance The Mortgagee may only apply
      insurance proceeds payable for home damages to arrearages and/or reduction of
      the unpaid principal balance if: • the amount of the proceeds exceeds the costs
      to repair the damages to the home; or • the insurance proceeds are insufficient
      to repair the home damages based on a certified repair estimate, and the Borrower
      is unable to demonstrate that they have additional funds from other sources
      to complete the repairs. iv. Optional Policies (A) Personal Property and Personal
      Liability Insurance The Mortgagee may allow the Borrower to add Personal Property
      and personal liability insurance premiums to their monthly payments. (B) Life
      or Disability or Optional Coverage Income Policies The Mortgagee must clearly
      separate the collection of unpaid optional coverage premiums from the collection
      of any unpaid Mortgage Payment. If the payment does III. SERVICING AND LOSS
      MITIGATION A. Title II Insured Housing Programs Forward Mortgages 1. Servicing
      of FHA-Insured Mortgages Handbook 4000.1 1171 Last Revised: 11/26/2025 not include
      all or a part of an optional coverage premium, the Mortgagee may not treat the
      failure to pay as a failure to pay a part of the Mortgage Payment.'
  judgment: false
