Hawaii Home Insurance Costs: How New Fannie Mae Rules Affect Roof Coverage

There is some welcome news for homeowners, homebuyers, and condo owners dealing with rising insurance costs. The Federal Housing Finance Agency recently announced that Fannie Mae and Freddie Mac are removing certain homeowners insurance requirements that had added cost and complexity in today’s market.

One of the biggest changes is that roofs will still need to be insured, but they will not always have to be covered on a full replacement cost basis for many qualifying loans. That added flexibility may help lower insurance costs in some situations and make it easier for borrowers to meet loan requirements.

For Hawaii homeowners, this change is especially relevant because it reflects what we are already seeing in the local insurance market.

Even Newer Homes May Benefit From the New Fannie Mae Rules

Why this matters right now

Insurance companies across many markets have been under pressure from rising claim costs, higher reinsurance costs, and aging housing stock. In response, carriers have been tightening underwriting, increasing premiums, and in some cases choosing not to renew certain homes.

Locally, some carriers are starting to offer renewals on homes where the roof is covered on an actual cash value (ACV) basis rather than replacement cost.

That is an important shift.

ACV roof coverage generally means the payout after a covered loss will be lower because depreciation is factored in. In other words, the older the roof, the less the policy may pay toward replacing it. While that is not as broad as replacement cost coverage, it can help keep premiums more manageable for homeowners.

Just as important, it can give carriers another option besides non-renewing the policy altogether.

A practical change for homeowners

In the real world, many homeowners are facing a difficult choice. Pay significantly more for broader coverage, accept more limited coverage, or risk losing access to coverage with a particular carrier.

That is why this update matters. It helps mortgage guidelines better align with today’s insurance realities.

If a local carrier is willing to renew a policy with the roof covered on an ACV basis, and that structure now fits within updated loan requirements, that can create more workable options for homeowners. It may not be the perfect solution, but in many cases it is better than the alternative of being forced into a much more expensive policy or facing non-renewal.

What homeowners need to understand about ACV roof coverage

ACV coverage can be a useful option, but it is important to understand the tradeoff.

With replacement cost coverage, the policy is generally designed to pay what it costs to replace the damaged roof with materials of like kind and quality, subject to the policy terms and deductible.

With ACV coverage, depreciation is subtracted from the value of the roof before the claim is paid. That means your out-of-pocket cost after a loss could be much higher.

For some homeowners, that tradeoff may make sense if the goal is to keep coverage in place and premiums more affordable. For others, especially those with older roofs or limited savings for a large unexpected expense, the reduced claim payout may be a significant concern.

The key is not whether ACV is good or bad in every case. The key is understanding what it means for your specific home and financial situation.

What this could mean for Hawaii buyers and condo owners

For buyers financing a home with a loan backed by Fannie Mae or Freddie Mac, these changes may make it easier to satisfy insurance requirements without having to chase coverage terms that are becoming harder to find.

For condo owners and associations, the broader changes may also help relieve some of the pressure caused by insurance market tightening and changing policy structures.

This does not mean coverage should be chosen based on loan compliance alone. A policy can meet lender requirements and still leave a homeowner with meaningful gaps in protection. That is why it is important to review both affordability and claim outcome when comparing options.

Our view

This is a positive and practical change. It recognizes that insurance markets have changed and that borrowers, associations, and lenders need more flexibility than they did in the past.

At the same time, lower upfront premium does not always mean better long-term value. If your roof is insured on an ACV basis, you need to know how that could affect you after a loss.

At Shane Pope Insurance Services, we help clients look at the full picture:

• what coverage options are available in the current Hawaii market

• what a lender may accept

• what the claim settlement difference could be between ACV and replacement cost

• what makes the most sense for the homeowner’s budget and risk tolerance

  
  

Final thoughts

The updated guidance from Fannie Mae and Freddie Mac is a meaningful step in the right direction. It gives more flexibility at a time when flexibility is badly needed.

And here in Hawaii, it lines up with what we are already seeing from local carriers. Some are willing to keep policies in force with ACV roof coverage, which may help consumers control costs while reducing the chance of non-renewal.

That may not be the ideal answer for every homeowner, but in today’s market, having more options matters.

If you have questions about your current policy, your roof coverage, or how these changes may affect a home purchase or renewal, Shane Pope Insurance Services is here to help.