Having home owners insurance when purchasing a home with a VA loan can be important when dealing with possible property risks.
Yes, in order to use the VA loan, you must obtain homeowner’s insurance prior to closing.
VA lenders will want to see that your homeowner's insurance policy covers risks common to the locality. These policies typically include coverage for:
The most common homeowners policy according to the National Association of Insurance Commissioners is the HO-3 or Special Form. The Special Form typically insures your property against all perils, including:
Please note that standard homeowners insurance policies do not typically cover natural disasters like floods and earthquakes. For natural disasters, you will need to purchase additional coverage.
Additionally, VA homebuyers purchasing a property located in special flood hazard areas, as identified by FEMA, are required to purchase flood insurance.
To protect your home and belongings from the detrimental effects of a flood, you’ll need to purchase a hazard insurance policy. Your VA lender may even require you to obtain a separate flood insurance policy before closing on the loan.
It is possible to obtain a VA mortgage with a home in a flood zone, as long as you receive flood insurance through the National Flood Insurance Program or a private insurer.
Not sure if your home is in a flood zone? Be sure to check out the FEMA Flood Hazard Map.
No, earthquake insurance is not typically required by VA lenders.
Homeowners insurance and hazard insurance are often used interchangeably. Here is the main difference between the two:
|Homeowners Insurance||Hazard Insurance|
|Financial protection against theft and damage to your home||Financial protection against severe structural damage caused by a natural disaster|
It’s common for homeowners insurance policies to have an occupancy clause stating someone must live in the home for it to be covered. This becomes tricky if you are deployed, and your home is vacant while you are away.
Before settling on a homeowners insurance policy, be sure to check for this clause. Try to pick one without a vacancy clause or one that makes an exemption for active military duty.