What Is Homeowners Insurance?

Homeowners insurance is a policy that protects your property against damage from fire, theft, storms, and liability claims. Every mortgage lender requires you to carry coverage for at least the loan amount before closing.

A standard HO-3 policy on a $350,000 home typically costs $1,200–$2,800 per year, depending on your state, coverage limits, deductible, and claims history. Your lender usually collects the premium through your monthly escrow payment so the policy never lapses. At closing, you will prepay 12 months of coverage upfront, plus 2–3 months into escrow — totaling roughly $1,500–$3,500 out of pocket on a typical policy.

Key Facts

• Typical annual cost: $1,000–$3,000+ depending on location, home value, and deductible
• Required by lenders: You must have active coverage from the day of closing
• Prepaid at closing: First year’s premium paid upfront, plus 2–3 months collected into escrow
• Standard coverage (HO-3): Covers dwelling, personal property, liability, and additional living expenses
• Not covered: Flood and earthquake damage require separate policies
• Deductible range: Most policies carry a $1,000–$2,500 deductible

Frequently Asked Questions

When do I need to buy homeowners insurance?

You need proof of coverage before closing day. Most lenders require you to bind a policy at least 1–2 weeks before your closing date so the insurance certificate can be verified during final underwriting.

Does homeowners insurance cover flooding?

No. Standard homeowners policies exclude flood damage. If your property is in a FEMA-designated flood zone, your lender will require a separate flood insurance policy, typically through the National Flood Insurance Program (NFIP) or a private insurer.

Can I shop around for homeowners insurance?

Yes, and you should. Rates vary significantly between carriers. Getting 3–5 quotes can save you $300–$800 per year. Bundling with auto insurance often unlocks an additional 5%–15% discount.