Lenders typically require homeowners insurance before you close on a home. If you don’t secure this insurance, your lender may refuse to finalize the mortgage, leading to delays and additional stress. Obtaining homeowners insurance as soon as your closing date is confirmed is advisable to ensure ample comparison and processing time. Having the policy in place at least a week before closing can help prevent any last-minute complications.
Is Homeowners Insurance Necessary Before Closing?
Lenders typically require home insurance before closing. Without it, the lender may halt the closing process, causing significant delays and posing potential financial risks.
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Mark Fitzpatrick
Head of Insurance, MoneyGeek
Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He has been quoted in several insurance-related publications, including [CNBC](https://www.cnbc.com/2020/04/15/cant-keep-up-with-insurance-premiums-heres-what-to-do.html), [NBC News](https://www.nbcnews.com/business/autos/flooded-cars-are-problem-their-owners-future-car-buyers-n1278493) and [Mashable](https://mashable.com/article/tesla-insurance-rates). Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.
Casie McCoskey
Content Editor
Casie McCoskey is a professional editor passionate about providing people with accessible information on personal finance. Before MoneyGeek, she worked in the legal field, drafting and editing briefs and motions.
![](https://res.cloudinary.com/moneygeek/image/upload/c_scale,q_auto:eco,f_auto,fl_lossy,w_100,b_white/v1613177245/Image_from_i_OS_825d26269a.jpg)
Mark Fitzpatrick
Head of Insurance, MoneyGeek
Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He has been quoted in several insurance-related publications, including [CNBC](https://www.cnbc.com/2020/04/15/cant-keep-up-with-insurance-premiums-heres-what-to-do.html), [NBC News](https://www.nbcnews.com/business/autos/flooded-cars-are-problem-their-owners-future-car-buyers-n1278493) and [Mashable](https://mashable.com/article/tesla-insurance-rates). Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.
Casie McCoskey
Content Editor
Casie McCoskey is a professional editor passionate about providing people with accessible information on personal finance. Before MoneyGeek, she worked in the legal field, drafting and editing briefs and motions.
Updated: July 18, 2024
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Key Takeaways
Most lenders mandate home insurance before closing to protect their investment and ensure coverage of any damages to the property from day one.
Not having home insurance before closing can lead to your lender refusing to finalize the mortgage or purchasing a force-placed policy on your behalf.
It's wise to obtain homeowners insurance as soon as you know your closing date to protect your investment and ensure efficient closing.
Is Home Insurance Necessary Before Closing?
Lenders typically require that you purchase homeowners insurance before you close on a home. Getting home insurance before closing protects both the buyer and the lender from potential risks such as fire, theft or natural disasters. This ensures that any unexpected damages are covered, providing peace of mind during the closing process.
What Happens if You Don’t Have Homeowners Insurance Before Closing?
Not having homeowners insurance before closing may lead to your lender refusing to finalize the mortgage due to the risk of their investment being unprotected. This can delay the entire homebuying process and cause unnecessary stress.
Two scenarios are likely if you don’t buy homeowners insurance before closing:
- Delayed Closing: Without proof of homeowners insurance, the lender may halt the closing process, causing delays and potentially jeopardizing your purchase agreement. This can result in rescheduling moving plans and added expenses.
- Force-Placed Insurance: The lender might purchase insurance on your behalf, known as force-placed insurance, often coming with higher premiums and limited coverage. This policy protects the lender but may not cover all your needs, costing you more in the long run.
If you don't buy home insurance before closing, you also face financial risks and potential losses without the necessary coverage.
When to Get Home Insurance Before Closing
Securing homeowners insurance as soon as your closing date is confirmed is advisable. This ensures you have adequate time to shop around and compare home insurance quotes to choose the best coverage for your needs. Having your policy in place at least a week before closing provides a buffer for any potential delays in processing. Timely acquisition of insurance helps ensure a smooth and hassle-free closing process.
Prepaying your homeowners insurance may earn you discounts and lower your overall premium costs. Many lenders actually require you to prepay the first year’s premium as part of the closing process. This payment is typically included in your closing costs, ensuring that the insurance is active from the moment you take ownership of the home. Prepaying also provides peace of mind, knowing your home is protected from day one.
How to Provide Proof of Home Insurance
To prove to the lender that you have homeowners insurance, you need to provide an insurance binder or a policy declaration page. This document, which your insurance company can send directly to your lender, outlines the coverage details and confirms the policy's activation. You may also need to include the lender's name and address as an additional insured or mortgagee on the policy. Completing these steps helps facilitate a smooth closing process.
Determining How Much Home Insurance to Buy
Before closing, you should get enough homeowners insurance to cover the total replacement cost of your home. This means having sufficient coverage to rebuild your home from the ground up in case of a total loss. Consulting with your insurance agent can help you determine the home insurance coverage you need based on your circumstances and local construction costs.
Some key considerations for getting home insurance before closing include:
Replacement Cost Coverage
Ensure your policy covers the full cost of rebuilding your home, not just its market value.
Personal Belongings
Include coverage for your personal property, such as furniture, electronics and clothing.
Liability Protection
This coverage protects you in case someone is injured on your property, and you are found liable.
Additional Living Expenses
Consider the coverage you would need for temporary housing and other expenses if your home becomes uninhabitable due to a covered loss.
Endorsements and Riders
Assess the utility of additional coverages for high-value items, natural disasters or specific risks not covered by standard policies.
How to File a Claim Before the Closing Date
If something happens to your home before the closing date, it's best to act quickly and efficiently to file a claim with your homeowners insurance. This ensures that any damage is promptly addressed and doesn't interfere with the closing process.
Here's a step-by-step guide on how to file a claim:
Contact Your Insurance Company
Immediately notify your insurance provider about the incident. Provide it with all necessary details, including the date and nature of the damage.
Document the Damage
Take photos and videos of the damage to provide evidence for your claim. Detailed documentation will support your case and speed up the claims process.
Prevent Further Damage
Take temporary measures to prevent additional damage to your property. This could include tarping a roof or boarding broken windows, ensuring your efforts are safe and reasonable.
File the Claim
Submit the claim through your insurance company's preferred method, whether online, over the phone or through an app. Make sure to include all relevant information and documentation.
Work With the Adjuster
An insurance adjuster will contact you to assess the damage. Be available for their visit and provide any additional information they may need.
Review the Settlement
Once the adjuster has completed their assessment, review the settlement offer provided by the insurance company. If you agree with the offer, the insurance company will proceed with payment for the repairs.
Coordinate Repairs
Arrange to complete the repairs using reputable contractors approved by your insurance company. Ensure the work is done promptly to avoid delays in the closing process.
FAQ About Needing Home Insurance Before Closing
As you approach the closing date on your new home, securing homeowners insurance is a critical step in the process. To help you understand what’s needed and why, we've compiled a list of frequently asked questions specifically focused on homeowners insurance requirements before closing.
Yes, most lenders require proof of homeowners insurance before closing on a property. This ensures the protection of their investment in case of damage or loss.
Standard homeowners insurance typically includes dwelling coverage, personal property coverage, liability protection and additional living expenses. Your lender may specify the minimum amount of dwelling coverage required.
If you don’t have homeowners insurance, your lender may delay the closing or purchase a more expensive policy on your behalf. This force-placed insurance may have limited coverage and higher premiums.
It’s best to purchase homeowners insurance once your closing date is confirmed. This helps avoid delays in providing proof of insurance to your lender.
About Mark Fitzpatrick
![Mark Fitzpatrick headshot](https://res.cloudinary.com/moneygeek/image/upload/f_auto,c_limit,w_256,q_auto/v1613177245/Image_from_i_OS_825d26269a.jpg)
Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.
Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.