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Do I need to purchase a homeowners insurance policy before closing on a loan?

Updated: Aug 1


It's an exciting time, you're purchasing a new home! But in order to buy that house you probably need a loan and to get that loan you are going to be told that you need to purchase homeowners insurance. But wait, why do you need to get insurance before you even own the house?

You are going to need a homeowners insurance policy before the lender will allow the closing to proceed. Otherwise, the loan won’t be finalized and funded — and nobody wants that. In a typical scenario, the loan officer or mortgage company will connect with your insurance agent to have proof of coverage sent over.

Home Insurance Protects You, as Well as the Lender

When you think about it from the lender’s perspective, it makes a lot of sense. In a typical mortgage scenario, it’s the lender who puts up most of the money for the purchase. The borrower pays much less. So the bank or mortgage company becomes the majority “stakeholder.”

Some companies keep a portion of the loans they generate on their books. So the house itself can become a liability for them, if it’s not properly insured. That’s why they typically require borrowers to purchase home insurance before closing day.

How do I show that I have insurance?

The common practice is that your loan officer will have proof of insurance sent to them well a head of closing date by your insurance agent. In some cases, a letter from the insurer will suffice, or a photocopy of the coverage documents.

AZ Insurance Team 480-535-5709 https://www.azinsuranceteam.com

*All policies are a little different and this may not be applicable to your insurance policy, talk to your agent to see what your policy covers.*


Phone 480-535-5709

Fax 480-785-4930

Text 480-878-7715

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