According to Fannie Mae, insurance coverage must equal the lesser of what percentage of the insurable value?

According to Fannie Mae, insurance coverage must equal the lesser of what percentage of the insurable value?

• A. 80%
• B. 100%
• C. 120%
• D. 60%

Answer: (B)

In the context of Fannie Mae guidelines, insurance coverage must equal the lesser of 100% of the insurable value. This requirement ensures that the property is fully protected against loss and aligns with prudent lending practices. Insuring the property for its full value mitigates risks for both the borrower and the lender, as it ensures that funds are available to restore or replace the property in the event of damage or loss. Choosing 100% as the benchmark for insurance coverage is essential because it guarantees that the full amount needed to rebuild or repair the property is covered. This full coverage is a protective measure that supports both the financial stability of the homeowner and the risk management for the lending institution involved in the mortgage. Other percentages, such as 80% or 60%, may not provide adequate protection, leaving gaps in coverage that could financially jeopardize both the borrower and the lender in the case of loss.

In the context of Fannie Mae guidelines, insurance coverage must equal the lesser of 100% of the insurable value. This requirement ensures that the property is fully protected against loss and aligns with prudent lending practices. Insuring the property for its full value mitigates risks for both the borrower and the lender, as it ensures that funds are available to restore or replace the property in the event of damage or loss.

Choosing 100% as the benchmark for insurance coverage is essential because it guarantees that the full amount needed to rebuild or repair the property is covered. This full coverage is a protective measure that supports both the financial stability of the homeowner and the risk management for the lending institution involved in the mortgage. Other percentages, such as 80% or 60%, may not provide adequate protection, leaving gaps in coverage that could financially jeopardize both the borrower and the lender in the case of loss.