Insurance Requirements

Amount

You are required to have enough insurance to cover the lower of either the replacement cost of the home or the remaining principal balance on your loan.

Example: If your unpaid principal balance (UPB) is $80,000 but the replacement cost is $120,000, you need to carry a minimum insurance of $80,000 total.

Note: There may be exceptions to this for properties in certain states. Your insurance carrier can tell you more about this.

Carrier

While there are a lot on the market, insurance companies must carry at least a B+ rating from A.M. Best to provide coverage on Mr. Cooper accounts.

Please contact us if you have questions about whether your preferred insurance providers qualify.

Types

Here are common types of homeowners insurance and general guidelines about which coverage you should maintain:

Remember, this is just an overview. That means you shouldn’t assume any of these do or don’t apply to you based on this list alone. A chat with your insurance carrier is the best way to be sure about your requirements.

Homeowners (Hazard) Insurance

This is required for all mortgages to protect your home and investment and it can be paid through your escrow account.

Flood Insurance

Required if you live in an area with special flood hazards and it can be paid through your escrow account. This is determined by FEMA and based on flooding within the last 100 years.

Generally, flood policies must provide coverage, at a minimum, of the lowest of the following amounts:

The full replacement cost of the dwelling and insurable improvements made to it.
The unpaid principal balance of the loan.
The maximum allowed through the National Flood Insurance Program (NFIP), which is $250,000.

Windstorm/Hurricane Insurance

Some states in high-risk areas—like the Gulf Coast and Hawaii—require this additional insurance separate from your homeowners (hazard) policy. If required, it can be paid through your escrow account.

Homeowner Association (HOA) Insurance

This can be required if you live in a condo or townhome. If required, your property association would manage it and include your payments as part of your HOA dues, so it will not be paid through your escrow account.

Mine Subsidence Insurance

May be required for people living in an area at high risk for movement of the ground surface in areas on top of former underground mines. This will not be paid through your escrow account.

Earthquake Insurance

May be required for people living in an area at high risk for earthquakes. It is common in California. This will not be paid through your escrow account.