VA Loans and Homeowners Insurance
Having home owners insurance when purchasing a home with a VA loan can be important when dealing with possible property risks.
Do VA Loans Require Homeowners Insurance?
Yes, in order to use the VA loan, you must obtain homeowner’s insurance prior to closing.
VA Loans Homeowners Insurance Requirements
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 dwelling, meaning the home and any attached structures, such as a deck.
- Stand-alone structures, such as a fence, shed, or detached garage.
- Personal property, such as belongings inside the home.
- Liability in the instance someone is injured on your property or damage unintentionally occurs to someone else’s property.
- Additional living expenses if you are required to live elsewhere while your home is being repaired.
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:
- Fire and smoke damage
- Theft, riots, and vandalism
- Wind, hail, lightning, ice, snow, and sleet
- Trees and other falling objects
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.
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.
Do VA Loans Require Earthquake Insurance?
No, earthquake insurance is not typically required by VA lenders.
Hazard Insurance vs. Homeowners Insurance
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 |
How Being Deployed Effects Insurance Policies
Occupancy Clause
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.
