(a) All proceeds received for insurance losses must be deposited with the board. These proceeds may be used to repair or replace the damaged or destroyed improvements, or they may be applied to the principal balance of the veteran's account.
(b) Normally, when there has been a loss the insurance company will issue a check jointly payable to the veteran and the board. The veteran should endorse the check and forward it to the board. The proceeds will be held in a special account until the damaged or destroyed improvement has been repaired or replaced, or until it has been determined that the proceeds are to be applied to the principal balance of the veteran's account.
(c) If there has been a partial loss, repairs shall be made in order to prevent further deterioration. If the loss is total, the veteran will have the option of rebuilding the improvement or applying the proceeds to the principal balance of his account. If applying the proceeds to the principal balance of the account pays it in full, any unused funds will be refunded to the veteran, or his or her designee, as soon thereafter as practicable.
(d) When an improvement is repaired or replaced, and the loss is under $500, the veteran should:
  (1) submit to the board itemized statements showing the materials and labor furnished; and
  (2) submit to the board an affidavit showing that all of the materials and labor specified in the statements were actually used in the repair or replacement of the improvement.
(e) When an improvement is repaired or replaced and the loss is over $500, the veteran should:
  (1) submit to the board an itemized statement showing the materials and labor furnished; and
  (2) allow sufficient time for the board to make a physical inspection of the repaired or replaced improvement.
(f) Reimbursement from the insurance proceeds may be made directly to the veteran or his creditors. If reimbursement is to be made to the veteran, the itemized statements mentioned in subsections (d)(1) and (e)(1) of this section must show that payment has already been made by the veteran. If reimbursement is to be made to the creditors, the veteran must authorize the board in writing to pay the creditors.
(g) Reimbursement can be made only when the damaged or destroyed improvement has been repaired or restored.
(h) If proceeds from insurance losses are not completely used in restoring improvements to their original condition, the remaining balance on deposit will be applied to the principal balance of the veteran's account.
(i) The application of insurance proceeds to the principal balance of the veteran's account shall not relieve him of the obligation to make the regular installment payments.

Source Note: The provisions of this §175.10 adopted to be effective March 11, 1986, 11 TexReg 1005