Do You Need Homeowners Insurance Before Closing on a House?

Do You Need Homeowners Insurance Before Closing on a House?

Do you need homeowners insurance before closing on a house?

Yes. Before you close on a mortgage, your lender may require that you obtain homeowners insurance and keep your home covered until the loan is paid off.

Before you can close on a mortgage, it is necessary to do a title search, gather cash for closing costs, then purchase a homeowners policy.

Key Takeaways

  • Most mortgage lenders will require proof that you have homeowners insurance in order to let you close on a house.
  • You can start looking for home insurance 3 weeks to a month prior to the actual closing date. This allows you to compare rates and coverage options.
  • Many mortgage lenders require proof that homeowners insurance has been in force for at least three days prior to closing.

Do I require homeowners insurance before closing?

Although homeowners insurance is not required under law, mortgage lenders will require you to have it in order to extend a loan. Your lender may also require that you obtain flood insurance if your home is located in a high-risk flood area.

Your mortgage lender will ask you for proof that you have a policy in force. To do this, your mortgage lender will require you to provide proof of coverage. You can also use your policy declarations as proof of insurance if you have them by the closing date.

When are lenders requiring you to buy homeowners insurance?

So, when to get home insurance when buying a house? Most mortgage lenders will require proof of homeowners’ insurance within a few days to two weeks prior to your closing date. You should shop for homeowners insurance at least a month before closing. This will ensure that your closing date is not delayed. It also allows you to compare and evaluate the coverage options. For purchasing coverage within a few weeks of the policy’s effective date, many companies offer an early-bird discount to forward-thinking applicants.

What amount of homeowners insurance does a mortgage lender require?

After your mortgage approval, your lender will send you notice asking for evidence of home insurance. The notice will outline the minimum requirements that your policy must meet.

1.   Scope for coverage

Most standard homeowners insurance policies will cover these perils. However, your mortgage lender may require that you purchase homeowners insurance.

2.   Minimum Coverage

Homeowners insurance will cover the replacement cost of your home, as well as the costs to rebuild it. This number is different to the home’s purchase price or market value.

The insurance company usually calculates the replacement cost. However, you can get a more precise estimate by having a home appraisal or speaking with a local contractor.

3.   Notification to the lender

A mortgagee clause may also be required to be included in your policy. This clause provides protection against cancellation of your policy without giving your lender at least 30 days notice.

4.   Proof that coverage

You will need to provide proof of your insurance coverage before you can close. This could be you:

  • Policy declarations page
  • Certificate of insurance
  • Insurance Binder

Homeowners insurance closing

The mortgage lender may require that you pay for a full year of homeowners insurance before closing. This is not necessarily a bad thing. Homeowners insurance is usually more expensive if it is paid monthly.

Your lender may require you to pay your mortgage and other homeownership costs through an Escrow account. Your homeowners insurance, private mortgage insurance, property taxes and property taxes are all added to your mortgage payment under escrow terms.


Eric is the creator of At Home in the Future and has been a passionate fan of the future since he was seven. He's a web developer by trade, and serves as the Director of Communication and Technology for a large church in Nashville, TN (where he and his family are building a high tech home in the woods).