Selling Guide B7-3-02, Property Insurance Requirements for One- to Four-Unit Properties

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• 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. The page states this in should form, not as an absolute must.

  claim fnma-b7-3-02#c1

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

  claim fnma-b7-3-02#c2

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

  claim fnma-b7-3-02#c3

• The maximum allowable deductible for all required property insurance perils for one- to four-unit properties is 5 percent of the property insurance coverage amount, and where a policy includes separate deductibles for different required perils, each individual deductible must not exceed 5 percent of the property insurance coverage amount.

  claim fnma-b7-3-02#c4

• The required perils listed are fire or lightning, explosion, windstorm including named storms, hail, smoke, aircraft, vehicles, and riot or civil commotion.

  claim fnma-b7-3-02#c5

• If a property insurance policy excludes or limits coverage of any of the required perils, the borrower must obtain an acceptable policy, for example a stand-alone policy, that provides adequate coverage for the limited or excluded peril.

  claim fnma-b7-3-02#c6

• This section does not state a coverage amount formula tied to the unpaid principal balance of the loan.

  claim fnma-b7-3-02#c7

• This section does not state flood insurance requirements and instead cross-references B7-3-06 for them, and it does not mention earthquake insurance.

  claim fnma-b7-3-02#c8

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Reviewer notes

Fetched on 2026-08-31. The page displays an August 5, 2026 effective date. The coverage form sentence is written as should, not must, and is recorded that way here; a prior draft stated it as an absolute requirement. Flood insurance requirements are addressed in a different Selling Guide section, B7-3-06, which this page cross-references and which is cited separately in this bundle. Published: 2026-08-05 Effective: 2026-08-05