diff --git a/staticaddr/loopin/actions.go b/staticaddr/loopin/actions.go
index cf21fc5f..b411e824 100644
--- a/staticaddr/loopin/actions.go
+++ b/staticaddr/loopin/actions.go
@@ -359,6 +359,35 @@ func (f *FSM) cancelSwapInvoice() {
 	}
 }
 
+// handleInvoiceUpdate applies the monitor state's invoice-update semantics and
+// reports whether the update produced a terminal event.
+func (f *FSM) handleInvoiceUpdate(update lndclient.InvoiceUpdate) (
+	fsm.EventType, bool) {
+
+	switch update.State {
+	case invoices.ContractOpen:
+		return fsm.NoOp, false
+
+	case invoices.ContractAccepted:
+		return fsm.NoOp, false
+
+	case invoices.ContractSettled:
+		f.Debugf("received off-chain payment update %v", update.State)
+		return OnPaymentReceived, true
+
+	case invoices.ContractCanceled:
+		// If the invoice was canceled we only log here since we still need
+		// to monitor until the htlc timed out.
+		log.Warnf("invoice for swap hash %v canceled", f.loopIn.SwapHash)
+		return fsm.NoOp, false
+
+	default:
+		err := fmt.Errorf("unexpected invoice state %v for swap hash %v "+
+			"canceled", update.State, f.loopIn.SwapHash)
+		return f.HandleError(err), true
+	}
+}
+
 // SignHtlcTxAction is called if the htlc was initialized and the server
 // provided the necessary information to construct the htlc tx. We sign the htlc
 // tx and send the signatures to the server.
@@ -737,28 +766,8 @@ func (f *FSM) MonitorInvoiceAndHtlcTxAction(ctx context.Context,
 			return f.HandleError(err)
 
 		case update := <-invoiceUpdateChan:
-			switch update.State {
-			case invoices.ContractOpen:
-			case invoices.ContractAccepted:
-			case invoices.ContractSettled:
-				f.Debugf("received off-chain payment update "+
-					"%v", update.State)
-
-				return OnPaymentReceived
-
-			case invoices.ContractCanceled:
-				// If the invoice was canceled we only log here
-				// since we still need to monitor until the htlc
-				// timed out.
-				log.Warnf("invoice for swap hash %v canceled",
-					f.loopIn.SwapHash)
-
-			default:
-				err = fmt.Errorf("unexpected invoice state %v "+
-					"for swap hash %v canceled",
-					update.State, f.loopIn.SwapHash)
-
-				return f.HandleError(err)
+			if event, done := f.handleInvoiceUpdate(update); done {
+				return event
 			}
 
 		case err = <-invoiceErrChan:
diff --git a/staticaddr/loopin/actions_test.go b/staticaddr/loopin/actions_test.go
index d75adf6c..866c5a5d 100644
--- a/staticaddr/loopin/actions_test.go
+++ b/staticaddr/loopin/actions_test.go
@@ -3,6 +3,7 @@ package loopin
 import (
 	"context"
 	"errors"
+	"fmt"
 	"testing"
 	"time"
 
@@ -24,6 +25,84 @@ import (
 	"google.golang.org/grpc"
 )
 
+// TestHandleInvoiceUpdate verifies that invoice state updates map to the
+// monitor events expected by the static address loop-in FSM.
+func TestHandleInvoiceUpdate(t *testing.T) {
+	t.Parallel()
+
+	swapHash := lntypes.Hash{1, 2, 3}
+	tests := []struct {
+		name      string
+		state     invoices.ContractState
+		event     fsm.EventType
+		done      bool
+		errString string
+	}{
+		{
+			name:  "open",
+			state: invoices.ContractOpen,
+			event: fsm.NoOp,
+		},
+		{
+			name:  "accepted",
+			state: invoices.ContractAccepted,
+			event: fsm.NoOp,
+		},
+		{
+			name:  "settled",
+			state: invoices.ContractSettled,
+			event: OnPaymentReceived,
+			done:  true,
+		},
+		{
+			name:  "canceled",
+			state: invoices.ContractCanceled,
+			event: fsm.NoOp,
+		},
+		{
+			name:      "unexpected",
+			state:     invoices.ContractState(99),
+			event:     fsm.OnError,
+			done:      true,
+			errString: "unexpected invoice state",
+		},
+	}
+
+	for _, test := range tests {
+		t.Run(test.name, func(t *testing.T) {
+			t.Parallel()
+
+			f := &FSM{
+				StateMachine: &fsm.StateMachine{},
+				loopIn: &StaticAddressLoopIn{
+					SwapHash: swapHash,
+				},
+			}
+
+			event, done := f.handleInvoiceUpdate(
+				lndclient.InvoiceUpdate{
+					Invoice: lndclient.Invoice{
+						State: test.state,
+					},
+				},
+			)
+			require.Equal(t, test.event, event)
+			require.Equal(t, test.done, done)
+
+			if test.errString == "" {
+				require.Nil(t, f.LastActionError)
+			} else {
+				require.ErrorContains(
+					t, f.LastActionError, test.errString,
+				)
+				require.ErrorContains(
+					t, f.LastActionError, fmt.Sprint(swapHash),
+				)
+			}
+		})
+	}
+}
+
 // TestMonitorInvoiceAndHtlcTxReRegistersOnConfErr ensures that an error from
 // the HTLC confirmation subscription triggers a re-registration. Without the
 // regression fix, only the initial registration would be performed and the