Types of Hazard Insurance Coverage

One-to-Four Family Residences

One-to-four family residences must protect against loss or damage from fire and other hazards covered by the standard extended coverage endorsement. The coverage should be of the type that provides for claims to be settled on a replacement cost basis. Pennymac will not accept hazard insurance policies that limit or exclude from coverage (in whole or in part) windstorm, hurricane, hail damages, or any other perils that normally are included under an extended coverage endorsement. A lender should advise borrowers that they may not obtain hazard insurance policies that include such limitations or exclusions—unless they are able to obtain a separate policy or endorsement from another commercial insurer that provides adequate coverage for the limited or excluded peril or from an insurance pool that the state has established to cover the limitations or exclusions.

The coverage should be of the type that provides for claims to be settled on a current replacement cost basis.

For land and improvements to support the use of replacement cost coverage, Pennymac does not require separate appraisal valuations.


Individual insurance policies are required on PUD units unless the PUD unit is covered under the project’s blanket policy and the PUD project’s constituent documents allow the individual PUD units to be included in the projects blanket policy.

In addition, the homeowners association must maintain a policy which covers the common areas, fixtures, equipment, personal property and supplies of the project.


On a condominium unit, an individual hazard insurance policy is not required.

Before delivering a mortgage loan to Pennymac, the Correspondent must verify that coverage is in force for the entire project.