Homeowners insurance protects a homeowner (and lender) in the event of property damage or loss resulting from an “event.”   It covers four main areas: interior damage, exterior damage, loss/damage of personal belongings, and injuries sustained on the property.

Homeowners insurance (a.k.a. hazard insurance) is required when getting a mortgage on a home. It’s generally part of your prepaid closing costs during the home loan process. A home that is owned free-and-clear without a mortgage should still have homeowners insurance. Lenders require it. Everyone should have it.

Homeowners Insurnace

Setting up your homeowners insurance in the first 72 hours after executing a contract in the mortgage loan process can help you close on time. Finalizing your insurance during the contract’s option period also helps you avoid the last-minute scramble should there be a prior insurance claim on the home.

Be sure to stress importance responsiveness to your insurance agent as they don’t always play nice with our request for your insurance declaration page.


Action Required by You

We need your Insurance Agent’s name and phone number so we can contact them to get the insurance in place. It’s key that we are using the correct insurance figures for the underwriting approval. The process slows down if you don’t have your insurance done within the first few days. So, to skip delays, get insurance pronto.

Pick an Insurance Agent & Coverage

You pick the insurance provider of your choice (like State Farm, Farmers, All State, etc.). You will also pick your coverage amounts. The coverage amount need to be the greater of the mortgage loan amount or the replacement cost of the home. The reason is because the lender wants to ensure they’ll be enough proceeds to either pay them off and/or rebuild the home in the event of a complete loss of the home.


The majority of the plans we see have deductibles of 1%; however, the insurance industry is starting to trend towards more 2% deductible plans. Most mortgage lenders will allow coverage plans with deductibles ranging from .5% to 5%. The lower the the deductible the higher the annual premium. Note: it may be up to an underwriter’s discretion to allow deductibles above 2% when a borrower is tight on asset reserves so please check with your lender if you have any questions.

Special Coverage

Natural disasters, such as earthquakes and hurricanes, require special coverage rather than standard policies. For those living here in north Texas, make sure you’re adequately insured for potential hail damage. Check what your standard policy covers if you live in an area prone to disasters.

Bundle Home and Auto

You may have heard that bundling your homeowners and automobile insurance together wil save you money, and that’s true. The savings can range from 5% to 20%. That said, the last few years the insurance industry has been hit hard and carriers are becoming more specialized. Some carriers are really competitive on home but not auto. Others are the opposite.  Be sure to connect with an Insurance Agent that will explore all your options.

Get a C.L.U.E.

The insurance industry does a C.L.U.E. report (Comprehensive Loss Underwriting Exchange) against you (the “subject”) and the home (“the risk”). They’ll need your current address as well as the address for the new home to run the loss report. The number of past claims on the new home and against your living history will impact your insurance rates. It’s better to know what to expect up front than to find out late in the home loan process.

Ask your insurance provider for a past loss report as soon as you execute a purchase contract. It would be prudent to know if there was a $40,000 water claim on the house that may not be in the Seller’s Disclosure. Many insurance companies ask for proof of repairs (such as receipts and invoices) for losses within the last three years prior to issuing an insurance policy. This can cause issues if the sellers have already packed and moved out of the home.


It’s NOT Mortgage Insurance

Homeowners insurance should not be confused with Mortgage Insurance (MI) – they are completely unrelated. Homeowners insurance protects you (the homeowner) and your property in the event of misfortune, such as a home fire. Mortgage Insurance protects a lender in the case that a borrower defaults and has their home foreclosed.

Please call us if you have any questions about the types of insurance and amounts of coverage required for procuring a home loan.


Mark Pfeiffer

Branch Manager
Loan Officer, NMLS # 729612

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