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Topic file 17 of 20

Insurance for a new owner

Your lender will require homeowners insurance before closing, and sometimes flood insurance too. Shopping for it early protects your budget and your closing date, and it is the first financial decision you make as an owner.

Homeowners insurance protects the home and your belongings against covered losses such as fire or wind, and covers your liability if someone is hurt on your property. Your lender requires it because the home secures the loan. The premium is usually collected monthly through your escrow account along with property taxes, so it directly affects your housing payment and your affordability.

The parts of a policy

A typical homeowners policy has several coverages. Dwelling coverage pays to repair or rebuild the structure. Other structures covers detached garages and fences. Personal property covers your belongings. Loss of use helps with living costs if you cannot live in the home after a covered loss. Liability and medical payments cover injuries to others. Each has a limit, and the policy lists exclusions; flood and earthquake are common ones.

Limits and deductibles

The dwelling limit should reflect the cost to rebuild, not the market price, because land does not burn. The deductible is what you pay before coverage starts. A higher deductible lowers the premium but raises what you must have in savings after a loss. Some policies use a percentage deductible for wind or hurricane damage, which can be far larger than the flat deductible. Read the declarations page before you choose.

Flood insurance

FEMA's flood maps identify high-risk areas, and federally backed loans on homes in those areas require flood insurance. But flood risk is not limited to mapped zones. FloodSmart explains how National Flood Insurance Program policies work, including waiting periods that can apply before coverage starts, which is why checking flood risk early matters.

Title insurance

Title insurance is different. It protects against problems with ownership that existed before you bought, such as unknown liens or recording errors. The lender's policy protects the lender. An owner's policy protects you and is optional in many places. The site's long read on title insurance explains how each works and what to ask.

Getting a policy in place on time

Lenders need proof of homeowners insurance before closing, and some homes are harder to insure than buyers expect because of age, roof condition or location. Start quotes as soon as you are under contract. Give each insurer the same dwelling limit and deductible so prices are comparable, ask what each policy excludes, and check the flood map for the address. When you choose, send the declarations page and the insurer's contact details to your lender, and confirm the premium matches the figure on your Closing Disclosure. The guide on homeowners insurance basics explains coverage, deductibles and escrow in more detail.

How much dwelling coverage to carry

The dwelling limit is the most the insurer will pay to repair or rebuild the house, so it should track rebuilding cost rather than what you paid. Rebuilding cost depends on square footage, construction type, finishes and local labor prices, and it can rise faster than general inflation after a regional disaster. Ask each insurer how it estimated the figure, whether the policy pays replacement cost or actual cash value, and whether it offers extended replacement cost or inflation adjustments. The guide on dwelling coverage walks through the estimate and the questions to ask, and it shows how underinsurance can leave you paying part of a loss yourself.

Flood coverage before closing

Flood damage is excluded from standard homeowners policies, and National Flood Insurance Program policies usually have a waiting period before coverage starts. FEMA's rules make an exception when the policy is bought in connection with making or increasing a loan, and a seller's existing policy can sometimes be assigned to you. Look up the address on FEMA's flood map early, ask the seller about past flood claims, and get a quote even if the home sits outside a high-risk zone. The guide on flood insurance for buyers explains when lenders require it and how to compare options.

How to use this file

Start with the homeowners insurance basics guide as soon as you are under contract, then request quotes from at least three insurers or an independent agent, using the same dwelling limit and deductible for each so the prices are comparable. Check the flood map for the address and ask about flood coverage even outside high-risk areas. Then read the long reads below on insurance, title and escrow so you understand how the premium flows into your monthly payment.

Guides in this file

  1. Condo insurance (HO-6): what your policy needs to cover

    The master policy covers the building. Your HO-6 fills the gaps it leaves.

  2. Dwelling coverage: how much insurance to put on the house itself

    Insure the cost to rebuild, not the price you paid.

  3. Flood insurance for home buyers: when it is required and how to get it in time

    Homeowners policies usually exclude floods. Check before you offer.

  4. Home warranty vs homeowners insurance: what each one covers

    Insurance covers sudden damage; a warranty covers worn-out appliances.

  5. Homeowners insurance basics for first-time buyers

    The policy your lender requires, and the gaps it leaves.

  6. Homeowners insurance deductibles explained

    A 2% deductible sounds small until you multiply it by your coverage.

  7. How to compare homeowners insurance quotes

    The cheapest quote is only cheaper if it covers the same things.

  8. Insuring an older home: coverage gaps and how to close them

    Older homes cost more to rebuild than buyers expect. The policy has to keep up.

  9. Owner's title insurance: what it protects and whether to buy it

    A one-time policy against old claims on your new home.

Related reading on this site

Questions buyers ask

When should I buy homeowners insurance?

Start getting quotes as soon as you are under contract, because the lender needs proof of coverage before closing and quotes can reveal costly issues such as an old roof or claims history at the address.

Does homeowners insurance cover floods?

Standard homeowners policies generally do not cover flood damage. Flood coverage is bought separately, through the National Flood Insurance Program or private insurers, and lenders require it for homes in high-risk flood areas with federally backed loans.

Sources checked for this page

Checked November 2026. Programs and limits change; confirm with the source before you rely on a figure.

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