Homeowners Insurance When You're Buying: When to Shop, What Your Lender Needs, and Avoiding Closing Delays
Homeowners insurance when buying a home is easy to leave until the last week, but it's one of the closing items that can hold up a purchase if a problem turns up late. If you're financing, the lender will typically need proof of coverage before closing. And some homes are harder or more expensive to insure than buyers expect.
This guide covers the buyer's timeline: when to start shopping, what can affect whether a home is insurable, what the lender usually needs and how to avoid last-minute delays. For how coverage itself works, see homeowners insurance 101. Requirements vary by contract, lender, policy, carrier and state.
When to Shop for Homeowners Insurance When Buying
A practical time to start is soon after your offer is accepted, during the inspection or due diligence period. At that point you have an address, a target closing date and, soon, inspection findings that an insurer may ask about.
Some buyers ask for estimates even earlier, while they're still comparing homes. A licensed insurance agent can often give a rough estimate for a specific property, which can help you compare total monthly costs before you make an offer.
Starting early gives you time to:
- Compare quotes for the same coverages, limits and deductibles
- Learn whether the home has features that limit your options, such as an older roof or past claims
- Ask questions about wind, hail or flood coverage if the home is in an exposed area
- Raise any insurability problem while you may still have options under your contract
Why Insurability Can Affect the Deal
Insurers decide which homes they'll cover and on what terms. A home that is hard to insure, or very expensive to insure, can change a buyer's budget or even the loan approval, since lenders count the insurance premium as part of the monthly housing expense.
Roof age and condition
Insurers commonly review roof age and condition when deciding whether to issue a policy. Depending on the insurer and the state, an older or damaged roof may lead to higher pricing, different coverage for the roof, a request for an inspection or a decision not to write the policy. Share relevant inspection findings with the licensed insurance agent you're working with and ask how they affect the quote.
Claims history on the property
Insurers may look at past claims tied to the property, not just to you. A history of water or roof claims can affect pricing or eligibility. The seller may be able to share a claims history report. Learn more about CLUE reports and home insurance claims history.
Other features insurers may ask about
Depending on the insurer, questions may also cover the age and condition of the electrical, plumbing and heating systems, wood stoves, pools and distance to a fire hydrant or fire station. Answer accurately. Incorrect information can create problems later, including at claim time.
Check the Flood Zone Early
Standard homeowners policies commonly exclude flood. If the home is in a high-risk flood zone and you're using a federally regulated or federally backed loan, the lender will generally require flood insurance. Even outside high-risk zones, flood coverage is worth asking about.
Flood insurance can take time to arrange, and some flood policies have a waiting period before coverage starts, with some exceptions tied to a new loan. Check the flood zone during your due diligence period, not the week of closing. For the details, see flood insurance and flood zones: what buyers should check.
Insurance Contingencies Vary by Contract and State
Some purchase contracts include an insurance contingency, which may let a buyer cancel or renegotiate if they can't get coverage on acceptable terms by a set date. Many contracts don't have one. Others may rely on a broader inspection or due diligence period that covers insurance along with everything else.
Whether you have this kind of protection, and how long it lasts, depends on your contract's wording and on the forms and practices used in your state. Ask the real estate agent or attorney handling your purchase what your contract says before the deadlines pass. Don't assume an insurance problem discovered late will let you out of the contract.
What Your Lender Needs Before Closing
If you're financing, the lender will set its own insurance requirements, based on the loan program and its investors. Common items include:
- Evidence of insurance. Lenders typically want proof of coverage before closing, such as the policy itself, a declarations page or a certificate or evidence of insurance form. Some lenders also accept an insurance binder. Ask the lender which form it accepts and when it needs it.
- The mortgagee clause. The lender is usually listed on the policy as the mortgagee, often with the words "its successors and/or assigns" and a specific mailing address. Get the exact wording from the lender and pass it to the insurer. A wrong clause is a common cause of last-minute fixes.
- Coverage amount and deductible. Lenders and loan programs may have minimum coverage requirements and limits on how high the deductible can be. Ask the lender for its requirements before you choose a deductible.
- The first year's premium. It's common to pay the first year's homeowners insurance premium in advance at closing, or before closing, depending on the lender and insurer. It shows up in the prepaid items on your Loan Estimate and Closing Disclosure.
- Escrow. Many loans include an escrow account that collects part of each monthly payment to pay future insurance premiums and property taxes. Learn more about what escrow is and who's actually holding your money.
The Consumer Financial Protection Bureau's Closing Disclosure explainer shows where insurance appears on your closing documents.
Keep coverage in force after closing. Lenders typically require insurance for as long as you have the mortgage. If coverage lapses, the lender may buy a policy itself and charge you for it. That coverage is usually more expensive and may protect only the structure.
If You're Buying a Condo
Condo buyers usually deal with two policies. The association carries a master policy on the building and common elements. You typically buy a condo unit owner policy, often called an HO-6, for your belongings, liability and the parts of the unit the master policy doesn't cover.
The lender will typically need a copy or certificate of the association's master policy showing the unit is covered. Depending on the master policy and the loan program, the lender may also ask for proof of your own unit owner policy, for example when the master policy leaves out interior items. Ask the association or its management company for the master policy certificate early, since it can take time to arrive.
Wind, Hail and Named Storm Deductibles
In some coastal and storm-prone areas, policies may have a separate deductible for wind, hail or named storms. These deductibles are often a percentage of the home's insured value rather than a flat dollar amount, so the amount you'd pay out of pocket after a storm can be much higher than the standard deductible.
Some policies may exclude wind entirely in certain areas, which means arranging wind coverage separately. When you compare quotes, compare the wind and named storm deductibles too, and ask how often they apply, such as per event or per season. The NAIC explains how named storm deductibles work. Rules on these deductibles vary by state.
A Simple Timeline to Avoid Closing Delays
- While comparing homes: ask a licensed insurance agent for rough estimates on properties you're serious about.
- Right after your offer is accepted: request quotes, ask the seller about claims history and check the flood zone.
- During inspections: share relevant findings, such as roof or system condition, and ask how they affect the quote.
- Before your contract deadlines: confirm you can get coverage on terms that work, and know what your contract says if you can't.
- Once you choose a policy: get the lender's mortgagee clause, coverage and deductible requirements, and send them to the insurer.
- Before closing: make sure the lender has received evidence of insurance with an effective date that matches your closing date, and confirm how the first-year premium will be paid.
Frequently Asked Questions
When should I get homeowners insurance when buying a home?
Many buyers start shopping right after their offer is accepted, during the inspection or due diligence period. The policy itself usually needs to take effect by the closing date, and the lender typically needs proof of coverage before closing.
Do I have to pay the full year's premium at closing?
It's common to pay the first year's premium in advance, at or before closing, but practices vary by lender and insurer. Your Loan Estimate and Closing Disclosure show how it's handled for your loan.
What happens if I can't get insurance on the home I'm buying?
It depends on your contract and your options. You might look for coverage elsewhere, address the issue that's causing the problem, renegotiate or, if your contract allows, cancel. A real estate attorney or the real estate agent handling your purchase can explain what your contract says.
Is a cash buyer required to have homeowners insurance?
Without a mortgage, there's usually no lender requirement, though an association may have its own insurance rules. Many cash buyers still arrange coverage effective at closing.
Can the price I'm quoted change before closing?
Quotes are generally estimates until the policy is issued, and final pricing depends on the insurer's underwriting. Pricing and coverage vary by policy, carrier and state.
The Bottom Line
Treat homeowners insurance as part of your due diligence, not a closing-week errand. Start quotes early, check the roof, claims history and flood zone, know what your contract says about insurance, and get the lender's exact requirements in writing. A little planning can keep insurance from becoming the reason a closing date slips.
This article is general information, not insurance, legal or lending advice. Coverage, pricing, deductibles and underwriting vary by policy, carrier and state, and contract terms and lender requirements vary by contract, lender and loan program. Talk with a licensed insurance agent, licensed loan officer or real estate attorney about your specific situation. Advice4Homeownership is a publisher, not a lender or an insurance company or agency.
