90164-CA Property Insurance Requirements

Property Insurance Requirements
For Section 202 of the Housing Act of 1959
or Section 811 of the National Affordable Housing Act

U.S. Department of Housing
and Urban Development
Office of Housing
Federal Housing Commissioner

OMB Approval No. 2502-0470
(Exp. 5/31/2010)

Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. HUD may not collect this
information, and you are not required to complete this form, unless it displays a currently valid OMB control number.
This information collection is necessary to ensure that viable projects are developed. It is important to obtain information from applicants to assist HUD in
determining if nonprofit organizations initially funded continue to have the financial and administrative capacity needed to develop a project and that the
project design meets the needs of the residents. The Department will use this information to determine if the project meets statutory requirements with
respect to the development and operation of the project, as well as ensuring the continued marketability of the projects. This information is required in order
to obtain benefits. This information is considered non-sensitive and no assurance of confidentiality is provided.
Owner's Name,Street Address,City, State, Zip

Project No.

Date

Project Name
Project Location

1. Reference is made to the Regulations of Section 202 of the
Housing Act 1959 or Section 811 of the National Affordable
Housing Act under which capital advances on the above property were made by HUD.
2. This notice is for the purpose of advising the Owner of HUD's
Requirements as to the types and amounts of Hazard Insurance
necessary to be maintained upon the subject property and of the
estimate by HUD of the Total 100% Insurable Value of the
property. The attention of the Owner is directed to the fact that
these Requirements, with respect to the types and amounts of
Hazard Insurance to be maintained, are continuous Requirements, as long as HUD holds a mortgage upon the property. It
is the duty of the Owner to maintain insurance in types and
amounts necessary to comply with the Requirements hereinafter
stated and as stated in the mortgage.
3. (a) Attached hereto and made a part hereof is Property Insurance Schedule, HUD-92329, constituting HUD’s estimate of the
Total 100% Insurable Value of the property. The Property
Insurance Schedule of Insurable Value is for the purpose of
estimating the amount of Permanent Insurance, as well as the
amount of Builders Risk Insurance.
(b) The Total 100% Insurable Value reflected upon the attached Property Insurance Schedule includes the cost of excavations, foundations, piers, or other supports which are below
the surface of the lowest basement floor or where there is no
basement, which are below the surface of the ground, underground flues, pipes, drains. These items are generally excluded
from the Property Insurance coverage. If the Builders Risk
Insurance or the Permanent Fire and Extended Coverage Insurance does not insure these items, then an amount acceptable to
HUD may be deducted from HUD's estimate of the Total 100%
Insurable Value for the purpose of estimating the amount of
Builders Risk Insurance or the amount of Permanent Insurance.
4. Insurance During Construction
Concurrently or prior to the issuance of a mortgage by HUD (or
release of any capital advance for construction of the property)
the owner shall provide a certified duplicate copy of:

(a) Builders Risk Insurance to be written on an All Risk
Completed Value form, in an aggregate amount equal to 100%
of the completed insurable value of the building(s). If the
building(s) or any part is to be occupied prior to its acceptance
from the contractor, the Owner must either: (a) obtain an
endorsement of the policy permitting occupancy during
completion of construction, or (b) secure permanent fire and
extended coverage insurance including a permit to complete
construction. In either event the consent of the surety, who
provides the construction performance-payment bond, must be
obtained. The Builders Risk Insurance policy shall name the
Owner as the Insured and name, as additional insured, the
general contractor, other contractors and subcontractors, as
their interests may appear. Each policy shall carry a standard
form Mortgage Clause showing loss, if any, payable to the
United States of America acting by and through the Secretary,
Department of Housing and Urban Development, his/her successor or assign, as their interest may appear.
(b) Public Liability Insurance on a Commercial General Liability form with limits of not less than $500,000 per occurrence
to protect the Owner during the construction phase from claims
involving bodily injury and/or death and damage to the property
of others. Such Commercial General Liability Insurance shall
be endorsed to include owners’ and contractors’ protective coverage.
(c) Blanket Fidelity Bond covering all officials and employees, including noncompensated officers, in an amount equal to
the average anticipated capital advance during the construction
period. The minimum limit shall be determined by dividing
the total mortgage amount by the estimated number of months
in the construction period plus 2 and rounding the quotient to the
nearest $50,000. Under no circumstances should a bond exceed
$500,000. Projects using modular components and projects for
which the average capital advancements are expected to exceed
$500,000 shall establish an escrow with a title company to
handle all advancements during the course of construction. In
cases where a title company is utilized, no fidelity bond is
required for the Owner until the project enters the operating

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form HUD-90164-CA (12/20/2005)
ref Handbooks 4571.4 and 4571.5

period.
(d) Vehicle Liability Insurance with limits of not less than
$300,000 for one person and $500,000 for more than one person
to protect the Owner for claims for bodily injury and/or death,
and not less than $50,000 against claims for damage to property
of others arising from the Owner’s operation of vehicles. Such
insurance shall include coverage for employers’ owned, nonowned and/or hired vehicles, where applicable.
(e) Director and Officers (D&O) Liability Insurance generally is available as part of a hazard insurance policy package. If
the coverage is not available as part of a package, the project still
may purchase the insurance if the cost is not excessive. HUD
has no standard form of D&O Liability Insurance; therefore, the
project representatives should explore this coverage with their
current carrier. The reasonableness of the premium can be
determined by soliciting more than one bid, and comparing the
expense of this insurance to other project line item expenses.
In some States, legislation permits nonprofit corporations to
indemnify directors and officers for liability they may incur for
negligence acts or breach of duty. However, HUD does not
permit an Owner to indemnify its directors and officers unless
so required by State law. Owners, therefore, must check with
the local HUD Field Office.
(f) Workers’ Compensation and Employers’ Liability Insurance (statutory or voluntary) covering all employees of the
Owner and any other facilities, the revenues of which are
pledged to project operations.
5. Permanent Insurance
Upon acceptance of the project, or any portion thereof from the
contractor, the Owner shall provide a certified duplicate copy of
the following hazard insurance and fidelity bond coverages. In
some instances, continuation of the insurance and bonding
obtained for the construction period, with proper endorsements
thereto, will be acceptable. In any event, the Owner shall assure
that there is no gap period in insurance protection during the
transition from the Builders Risk Insurance to the Permanent
Insurance.
(a) Fire and Extended Coverage Insurance shall be provided
on a blanket basis or with an agreed amount clause in amounts
not less than 80% of the projects current insurable value. Such
insurance shall include the project building(s) and its Ownerowned contents, as well as on building the revenues of which are
pledged to secure the mortgage. Such insurance policies shall
name the Owner as the Insured and shall carry a standard
Mortgage Clause showing loss or damage, if any, payable to the
Owner and the United States of America acting by and through
the Secretary, Department of Housing and Urban Development,
his/her successors or assigns, as their interest may appear.
The insurable value shown on the Property Insurance Schedule,
Form HUD-92329, shall be periodically updated using available residential building cost indices. The amount of property
insurance on the project shall be adjusted accordingly to maintain the amount of insurance to 80% of the current insurable
value.

(b) Use and Occupancy (Rental Value) Insurance shall be
procured on each building. Each such rental value insurance
policy shall contain a standard Mortgage Clause making loss or
damage, if any, payable to the United States of America acting
by and through the Secretary, Department of Housing and
Urban Development, his/her successors or assigns, as their
interest may appear.
(c) Public Liability Insurance on a Commercial General Liability form with limits of not less than $500,000 per occurrence
to protect the Owner from claims involving bodily injury and/or
death and property damage which may arise from the Owner’s
operations, including any use or occupancy of its facilities,
grounds and structures, and shall include independent contractors coverage, where applicable.
(d) Blanket Fidelity Bond covering all officials and employees, including noncompensated officers of the Owner, in an
amount equal to two months’ gross revenues or $50,000 whichever is greater, unless greater amounts are required by the
Owner. (Where the gross revenues for a project are substantially
below the minimum $50,000 bonding requirement for operation, the bond shall be reduced to that sufficient to cover two
months’ gross revenues.)
(e) Vehicle Liability Insurance. If the Owner owns or operates a vehicle in the operation of the project, including nonowned and/or hired vehicles operated for the benefit of the
Owner, the Owner shall procure and maintain Vehicle Liability
Insurance. Such insurance shall provide for limits of liability of
not less than $300,000 for one person and $500,000 for more
than one person to protect the Owner from claims for bodily
injury and/or death, and not less than $50,000 against claims for
damage to property of others.
(f)

Boiler Insurance and Inspections.

(1) Coverage. If boilers located in the project are other
than steam boilers, specific Boiler Explosion Insurance generally is not required. If there is a steam boiler in operation in
connection with the project specific Boiler Explosion Insurance
is required. In determining the adequacy of the amount of this
coverage there must be careful review and consideration of all
the facts and exposures for the purpose of estimating the maximum possible amount of a single loss by steam boiler explosion.
The minimum limit of Boiler Explosion Insurance, when required, is $100,000 per accident, per location.
After careful examination of all the related information in any
given case, it may be determined this required minimum limit of
$100,000 is inadequate. In that event a greater amount of
coverage shall be provided. Determination of the amount is the
responsibility of the Owner.
(2) Policy form. Boiler Explosion Insurance, as herein
required, shall be evidenced by a standard form of Boiler and
Machinery policy broad form, including Repair and Replacement and excluding Bodily Injury, showing the Owner as the
insured and shall have attached a standard Mortgage Clause
showing loss or damage, if any, payable to the United States of
America acting by and through the Secretary, Department of
Housing and Urban Development, his/her successors or assigns,

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form HUD-90164-CA (12/20/2005)
ref Handbooks 4571.4 and 4571.5

robbery are recommended. Broad form money and securities
insurance is not recommended unless it can be secured for a
premium not in excess of the premium for the safe burglary,
interior robbery, and messenger robbery coverage.

as their interest may appear.
(3) Inspection requirements. All directly fired boilers (including steam, hot water heating and hot water supply
boilers) and hot water supply tanks indirectly fired with steam
shall be subject to inspection annually except: hot water
boilers and hot water supply tanks which are equipped with
ASME labeled pressure relief valves and do not exceed any of
the following limitations:

(2) Overnight protection of funds. If funds are retained in
the project overnight, the purchase of a safe is recommended.
If burglary insurance is carried and a reduction in premium
sufficient to justify the cost will result, not less than an “E”
classification burglary resistive safe is recommended. When
burglary insurance is not carried, the type of safe purchased
should depend on the amount of funds left in the project office
overnight.

a. a heat input of 200,000 BTU/hour
b. a water temperature of 2l0oF (99oC)
c. a water containing capacity of 120 gallons

(j) Workers’ Compensation and Employers’ Liability
(statutory or voluntary) for all employees of the Owner and
other facilities, the revenues of which are pledged to project
operations.

The annual inspection shall be conducted by either:
a. a State or local inspection facility or other authorized
inspection service created by State or local law to inspect
boilers, or

6. Insurance Carriers

b. an insurance company which has been licensed or registered by a State or locality and whose inspection services are
acceptable under State or local ordinances.

The acceptability of insurance carriers, types of coverage and
the forms, conditions, amounts and scope of insurance policies
are the responsibilities of HUD. The Secretary will accept, as
a temporary document of proof of coverage, Certificates of
Insurance, Insurance Binders or Memoranda of Insurance until
such time a certified duplicate copy of the policy(ies) is
received. A certified duplicate copy of all policies shall be sent
to:

(g) Flood Insurance. (Required whenever the property is
located in an area of special flood hazards in which flood
insurance is available under the National Flood Insurance
Act.)
Required

Not Required

Flood insurance shall be provided for the subject property
during the term of the mortgage. The insurance shall be in an
amount at least equal to the outstanding principal, or the
maximum amount of insurance available with respect to the
project under the National Flood Insurance Act, whichever is
lesser. The policy shall show the Owner as insured and shall
show loss, if any, payable to the United States of America
acting by and through the Secretary, Department of Housing and
Urban Development, his/her successors or assigns, as their interest may appear.

U.S. Department of Housing and Urban Development
ATTN:Management Branch
451 7th Street, SW Room 6114
Washington, DC 20410-8000
7. Reporting losses and accidents
The Owner is responsible for the prompt reporting of any
losses or accidents to the insurance carriers and to HUD.
8. Loss Settlement Drafts and Checks

(h) Director and Officers (D&O) Liability Insurance may be
obtained or continued as provided under 4.(e) above.
(i)

Burglary and Robbery Insurance (optional).

(1) Recommended types of coverage. In the event the
Owner decides that burglary and robbery coverage is to be
carried, only safe burglary, interior robbery and messenger

(a) Loss settlement drafts and checks in settlement of losses
sustained under any of the aforementioned insurance coverages shall always include the Secretary of HUD as payee.
(b) Loss settlement drafts and checks should be forwarded to
the HUD Field Office Director having jurisdiction over the
area in which the property sustaining the loss is situated, and
the Director is responsible for the endorsement and release of
such instruments on behalf of the Secretary of HUD.

U.S. Department of Housing and Urban Development
By (Authorized Agent)

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form HUD-90164-CA (12/20/2005)
ref Handbooks 4571.4 and 4571.5