Homeowners insurance is a closing requirement, which means it arrives on most buyers' radar late, usually as a task the lender adds to a checklist. Handled that way it is a scramble, and a scramble produces a policy chosen on price alone.
Handled earlier it is straightforward, and several of the decisions turn out to affect whether you want the house at all. Here is the order things actually happen in.
Before you make an offer
Two questions belong in the house-hunting stage, not the closing stage.
Is the property insurable, and on what terms? Availability has tightened in a number of markets. Roof age, wildfire exposure, wind exposure, distance to a fire station, older wiring or plumbing systems, and the property's own claims history all affect whether the standard market will write it. A property that only a residual market or a surplus lines carrier will cover is a different financial proposition. See wildfire risk and FAIR plans and admitted vs surplus lines carriers.
What is the flood status? Flood is excluded from homeowners policies. If the property sits in a mapped special flood hazard area and the loan is federally backed, flood coverage will be required, and there are waiting periods to plan around. Even outside mapped zones, flood coverage may be worth having. See flood insurance and the NFIP explained.
A quick call to an agent with the address, year built and roof age before you write an offer is a small effort that occasionally changes the decision.
During the inspection period
The inspection report is an insurance document as much as a repair list. Underwriters care about several of the same items an inspector flags.
Ask the inspector to note explicitly:
- Roof material, age and condition, which drive both eligibility and how a claim gets settled. See roof age and roof claims
- Electrical system type and panel, since certain older wiring types and panels affect eligibility with many insurers
- Plumbing material and water heater age, both common sources of water claims
- Heating system type and age, including any supplemental heat sources
- Foundation and grading, particularly water management around the structure
- Any prior repair evidence suggesting past damage
At the same time, ask the seller for the property's claims history and request the property's own report from the specialty consumer reporting agencies. Claims attach to a property as well as to a person, and a prior water or fire claim can affect your terms. See CLUE reports and claims history.
Roughly three to four weeks before closing
This is when to start the coverage conversation in earnest. It gives you time to get quotes, resolve underwriting questions, and get an inspection scheduled if one is required.
Information to have ready:
- Full address, year built, square footage and construction type
- Roof age and material
- Ages of the electrical, plumbing, heating and water heater systems
- Whether there is a pool, trampoline, wood stove or other rated feature
- Distance to the nearest fire hydrant and fire station, if known
- The purchase price and the appraisal, and separately, an estimate of rebuild cost
- Your own details: date of birth, any prior claims, current auto insurer if bundling
See how to shop for insurance for the general version of this list.
Setting the coverage, not just the price
The single most consequential decision is the dwelling limit, and the most common first time buyer error is anchoring it to the purchase price.
Coverage A should reflect rebuild cost, not market value. The two differ because market value includes land and location, which do not burn. In some markets rebuild cost is well above purchase price, and in others below it. See how much dwelling coverage do you need.
The other decisions worth making deliberately rather than by default:
| Decision | What to weigh |
|---|---|
| Personal property basis | Replacement cost or actual cash value. See actual cash value vs replacement cost |
| Liability limit | Coverage E is inexpensive to raise and matters more than most buyers expect |
| Deductible | A higher deductible lowers the premium and raises what you fund yourself |
| Wind, hail or hurricane deductible | Often a percentage rather than a flat amount. See hurricane, wind and hail deductibles |
| Water backup | Sewer and drain backup is commonly excluded without a water backup endorsement |
| Ordinance or law | Matters most on older homes. See ordinance or law coverage |
| Scheduled items | Jewelry, instruments and collections face sublimits. See scheduling valuables |
About a week before closing
Bind the policy with an effective date matching the closing date, and get the evidence of insurance to the lender and title company. Lenders typically want the declarations page or an evidence of property insurance form showing the mortgagee clause with their exact name and loan number.
Two details that cause last minute problems:
- The mortgagee clause has to be exactly right. Lenders reject forms with the wrong entity name or an incorrect loan number, and it is a common source of delay.
- The first year's premium is usually collected at closing, often into escrow. Check how yours is being handled so it is not paid twice. See escrow and force-placed insurance.
If flood coverage is required, remember the waiting period. NFIP policies generally carry a waiting period before coverage takes effect, with an exception commonly applied when coverage is required in connection with a loan closing. Confirm the timing with the agent writing the flood policy.
Closing day and the weeks after
- Confirm the policy is active as of the closing date, not the following day.
- Keep the declarations page where you can find it, and read it once. See how to read your declarations page.
- Build a home inventory while the house is still relatively empty and you remember what you moved in. See building a home inventory.
- Check whether the seller's coverage is cancelled, which is their responsibility but occasionally gets missed.
- Ask about discounts you now qualify for, including multi-policy if your auto sits elsewhere. See insurance discounts worth asking about.
- Revisit after any renovation, since improvements change rebuild cost. See renovating a home.
Things first time buyers commonly miss
- A separate deductible for wind or hail that was not obvious at purchase
- Sublimits on jewelry, cash, firearms and collectibles, which apply within the personal property limit
- Flood and earthquake being excluded rather than optional add-ons on the same policy. See earthquake insurance explained
- Other structures coverage, Coverage B, being a percentage of the dwelling limit and sometimes too low for a detached garage or shop
- Loss of use, Coverage D, and what it actually pays. See loss of use and additional living expenses
- Liability exposures from a pool, a dog or a trampoline. See home liability
Related reading: what homeowners insurance covers, life events that change your insurance, and how insurers set your rate.
Underwriting standards, required coverages, flood waiting periods, closing practices and lender requirements vary by insurer, by lender and by state, and your policy documents, loan documents and state law control. For your own situation, speak with a licensed agent, your lender, or your state's Department of Insurance. You can also request home insurance quotes and get connected with licensed providers in your area.