Additional Hazard Insurance Coverage


Requirements for 1-4 unit properties apply to similar residential properties within a Planned Unit Development (PUD) or a ground lease community.

If the individual units are covered by insurance purchased by their respective owners or leasehold lessees, the PUD homeowners association or the fee simple landowner/lessor of the ground lease community must maintain "all risk" coverage for common areas and property for 100% of their insurable value and provide for loss or damage settlement on a replacement cost basis. The association or fee simple landowner/lessor must also obtain any additional coverage commonly required by private mortgage investors for developments similar in construction, location and use, including the following where applicable and available:

  • Agreed amount
  • Demolition cost
  • Increased cost of construction
  • Boiler and machinery

The insurer's minimum liability per accident under boiler and machinery coverage must equal the insurable value of the building housing such boiler or machinery or $2 million, whichever is less.

Pennymac will also accept blanket insurance covering all units in the PUD or ground lease community as well as insurable common areas and property, if called for in the PUD's governing documents or in the lease. Such coverage must meet the requirements applicable to each PUD or ground lease community unit and those applicable to insurable common areas and property. Deductibles are allowed under this blanket coverage under the terms and conditions stipulated above.

The PUD's or ground lease community fee simple owners' insurance policy must name the insured in substantially the same language as follows:  Association of the Owners of the Planned Unit Development for the use and benefit of the individual owners (designated by name, if required by law or the governing documents).


Condominiums must be covered by an insurance policy which protects against fire, and all other hazards that are normally covered by the standard extended coverage endorsement, and all other perils customarily insured against by similar types of projects, including those covered by the standard “all risk” endorsement.

If the policy does not include an “All Risk” endorsement, Pennymac will accept a policy that includes the “broad form” covered causes of loss.

The homeowner’s association must maintain the hazard insurance policies described in the Guide. Premiums with respect to such policies should be considered a common expense of the project.

Policies covering the common elements for a PUD project must cover all of the common elements except for those that are normally excluded from coverage, such as land, foundation, excavations, etc.

Fixtures and building service equipment that are considered part of the common elements, as well as common personal property and supplies, should be covered.

Pennymac will accept such policies in satisfaction of the insurance specifications for the units, if the project’s legal documents allow for blanket insurance policies to cover both the individual units and common elements.

The “master” or “blanket” policy covering the common elements of a condominium project must cover all of the general and limited common elements that are normally included in coverage such as fixtures, building service equipment and common personal property and supplies belonging to the homeowners association.

The policy must also insure fixtures, equipment, and other personal property inside individual units if they will be financed, whether or not the property is part of the common elements. The condominium owners association must maintain blanket "all risk" coverage for the following:

  • General and limited common elements within the condominium project
  • Fixtures, machinery, equipment and supplies maintained for the service for the condominium project
  • Fixtures, improvements, alterations and equipment within the individual condominium units

Coverage must be for 100%of the insurable value of the common elements or property described above and provide for loss or damage settlement on a replacement cost basis.

The additional coverage required of PUD homeowners associations are also required of condominium owners associations where applicable and available.

The deductible for fire, water (not caused by flooding) or wind damage to the insured improvements (generally designated as "building" in the insurance policy) may not exceed 5% of the limit maintained for building coverage.

The insurance policy of the condominium owners association must name the insured in substantially the same language as follows: Association of Owners of the...Condominium for the use and benefit of the individual owners (designated by name, if required by law or the governing documents).

If the mortgaged premises are in a Detached Condominium Project and the condominium governing documents so permit, Pennymac will accept insurance for the mortgaged premises that meets the requirements of 1-4-unit properties. The condominium unit owners association must maintain all other applicable insurance coverages required