Many homeowners insurance companies offer a variety of benefits, discounts and policies suited for active-duty military service members and veterans. So, finding the right home insurance requires a clear understanding of the type of coverage you need to fit your lifestyle.
Since many VA mortgage loans require home insurance, weâve narrowed down the best home insurance companies for veterans to help with your search and help you during your home buying journey.
Purchasing a home is an exciting milestone. But before you can close on your VA mortgage, your lender will require you to have homeowners insurance in place. This coverage protects the property against damage and provides important liability protection.
What exactly is required for VA loan homeowners insurance? Let’s take a close look at key guidelines borrowers should know.
Overview of Homeowners Insurance
Homeowners insurance provides financial protection for your property and belongings A standard policy includes several key coverages
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Dwelling coverage – Pays to repair or rebuild your home if it’s damaged.
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Other structures coverage – Covers detached buildings like garages, fences and sheds.
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Personal property coverage – Replaces stolen or damaged personal belongings
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Loss of use – Pays for extra living expenses if you can’t live in your home during repairs.
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Liability coverage – Protects you if someone is injured on your property.
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Medical payments – Covers medical bills for people injured on your property.
Homeowners policies do NOT cover flood or earthquake damage by default. You’ll need separate add-on policies for those risks.
Now let’s look at the specifics of homeowners insurance for VA loans.
Do VA Loans Require Homeowners Insurance?
Yes, homeowners insurance is required when you purchase a home with a VA loan. Your lender will ask for proof of coverage before closing.
VA guidelines state the insurance must cover common risks for your area. Exact requirements may vary by lender, but coverage will typically include:
- Fire
- Smoke
- Wind
- Hail
- Lightning
- Theft
- Vandalism
- Falling objects like trees
- Liability
- Additional living expenses
How Much Homeowners Insurance Do You Need?
VA loans require that your dwelling coverage is sufficient to rebuild your home. This is called replacement cost coverage.
The policy limit should reflect today’s construction costs, not the home’s market value. This ensures the insurer will pay the full cost to reconstruct your home in the event of a total loss.
Coverage for personal property and other structures is based on their cash value. Speak with your insurance agent to determine appropriate limits for all parts of your policy.
Flood Insurance Requirements
If the home is in a FEMA-designated high-risk flood zone, flood insurance from the National Flood Insurance Program (NFIP) is required. Your lender will verify the flood zone during the underwriting process.
The policy must cover both the home and any detached structures on the property. VA flood insurance minimums are:
- $250,000 building coverage
- $100,000 personal property coverage
Higher limits may be recommended based on the home’s value and mortgage amount.
What Documents Do Lenders Require?
Before closing, you must provide one of the following documents as proof of homeowners insurance:
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Insurance binder – A temporary document that binds coverage until the policy is issued. It must list the coverage details, effective dates, and premium.
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Declaration page – The first page of your insurance policy outlining key terms like coverage limits and deductibles.
Either document must list the lender as an interested party. This means they’ll be notified if the policy is canceled.
Your deductible cannot exceed 5% of the dwelling coverage limit. Make sure all requirements are met before submitting your proof of insurance.
Homeowners Insurance Costs
Homeowners insurance rates vary based on factors like:
- Location and risk exposures
- Age and construction type of home
- Amount of coverage
- Claims history
- Credit score
The national average cost for homeowners insurance is $1,249 per year according to the National Association of Insurance Commissioners. However, premiums can range from under $500 up to $5,000 or more depending on your situation.
When shopping for VA loan homeowners insurance, get quotes from several companies to find the best rate. Ask about discounts you may qualify for as a Veteran or new homebuyer.
How is the Policy Paid For?
At closing, you’ll need to bring the first year’s insurance premium. This lump sum payment can be covered in your closing costs.
After the first year, your monthly mortgage payment will include an escrow amount to pay the annual or semi-annual premium. The lender collects funds in escrow each month and handles paying your insurance when it comes due.
Key Differences in Homeowners vs. Mortgage Insurance
Homeowners insurance and mortgage insurance may sound similar, but they serve very different purposes:
| Homeowners Insurance | Mortgage Insurance |
|---|---|
| Protects your property from damage and liabilities | Protects the lender if you default on the mortgage |
| Required for VA loans | NOT required for VA loans |
| You pay the premiums | Lender pays the premiums |
| Stays in effect as long as you own the home | Goes away once you reach 20% equity |
This table highlights why VA loans are so beneficial for borrowers. You get the security of homeowners insurance without the added cost of mortgage insurance.
Special Considerations for Deployed Servicemembers
If you’re active duty military, verify your homeowners insurance policy doesn’t exclude coverage when the home is vacant. Some policies have occupancy clauses requiring someone live in the dwelling.
Look for a policy that makes an exception for deployed servicemembers. Otherwise, you may need a rider to provide liability and property coverage during your absence.
Shopping for VA Loan Homeowners Insurance
As you search for VA homeowners insurance, keep these tips in mind:
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Get quotes from multiple insurers to compare rates and find the best value. Online comparison sites can simplify this process.
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Ask about discounts for security systems, new homes, multi-policy bundling, and other ways to lower your costs.
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Inspect the property and address any safety concerns that may impact premiums.
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Consider higher deductibles to reduce your monthly premium costs.
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Review policy exclusions and limitations carefully. Flood and earthquake coverage will be separate.
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Ask your real estate agent for trusted insurance referrals in your area.
Following VA guidelines ensures your new home is properly covered. If you have questions on homeowners insurance requirements, discuss them with your loan officer early in the mortgage process.
Insuring Your VA Loan Investment
Homeownership is an exciting adventure. Homeowners insurance provides financial protection so you can enjoy your new residence without worrying about unexpected repairs or claims.
By understanding VA requirements for hazard coverage, flood policies, proof of insurance, and other key details, veterans can shop for coverage confidently.
Protect your VA loan investment and loved ones by securing the right homeowners insurance for your situation. With the proper preparations, you can sit back, relax, and celebrate joining the ranks of American homeowners!
Homeowners Insurance Requirements For VA Loans
Veterans who purchase a home with a VA loan from the U.S. Department of Veteran Affairs (VA) are required to obtain mortgage insurance with hazard insurance coverage.
While the VA doesnât sell their own home insurance, they can help connect you with the right home insurance company for veterans and even help you choose the right coverage for your home and belongings.
Hazard insurance is a subsection of homeowners insurance that covers severe structural home damage from natural disasters. Some VA lenders may even require a separate flood insurance policy since flooding isnât typically covered by standard policies.
Standard homeowners insurance policies typically include dwelling coverage, coverage for other structures on your property like a detached garage, personal property coverage for damaged or destroyed belongings and liability coverage in the cause of injury. Veteran home insurance policies should include everything in a standard home insurance policy.
Veteran loan lender sometimes s require insurance payments in escrow, which is when a third party holds large sums of money or a property until certain conditions have been met. In this circumstance, homeowners will be required to pay a number of monthsâ worth of home insurance premiums upfront and then continue their monthly payments to maintain the balance.
Fortunately, VA borrowers are not required to buy private mortgage insurance (PMI) since the federal government guarantees these loans and veterans are often exempt from making a down payment. There is a VA funding fee that is between 0.5% â 3.3% depending on the type of loan, down payment and whether itâs in first or subsequent use. It can be paid upfront or built into the loan.
See What You Qualify For
Active duty military should compare policies from military insurance companies since they accommodate deployment and other situations specific to active duty military.
The most common choice for active-duty military is USAA since they offer many financial services such as bundling home and auto insurance as well as benefits for military personnel.
USAA is highly rated because of its customer service, coverage options and low-cost policies, which include coverage for fire, theft, windstorms, earthquakes, home sharing and military uniform coverage.
USAA hires veterans and spouses through their Hiring Our Heroes (HoH) program and Military Spouse Fellowship Program (MSFP). Theyâve also developed programs with the goal of skill development for successful transitions into civilian life. USAA employees also attend training where they learn about challenges in the military lifestyle to better understand their customers.
Their policies are noted as being affordable and customer reviews report them to be âattentive, thorough and quick in the insurance claims processâ
- Pros: There are a handful of different discounts offered by USAA such as their bundling discount, claims-free discount, home security system discount, rental car discounts, new home discount and discounts for insuring your home for the full rebuilding cost.
- Cons: USAA eligibility is only given to military members and their families, and there are no local agents or insurance brokers available to USAA customers. There also might be fewer discounts than competitors.
The Armed Forces Insurance (AFI) is another military-specific insurance company that includes coverage for your home and belongings, liability insurance, medical payments and loss of use coverage.
Veterans looking for a wide range of insurance riders will enjoy the fifteen options offered by AFI, including earthquake, flood coverage, equipment breakdown coverage, golf cart coverage, animal liability, earthquake, flood, identity theft and more.
They also have many discounts to help lower your premium, such as a new home discount, companion policy discount and a gated community discount.
AFI also provides service from a personal agent no matter what state you reside in and are proud to be military specialists and highlight their strong relationship with the Association of the U.S. Army (AUSA.)
They offer coverage for condos with the AFI policy that protects the condo interior. They also provide renters insurance and their AFI renters insurance policy has personal liability coverage for military personnel.
- Pros: The Armed Forces Insurance is the best for endorsements, which are changes to your policy that adjust your coverage. They also offer more discounts compared to other providers like USAA and GEICO.
- Cons: Unfortunately, this insurance provider has fewer products than competitors such as Allstate and State Farm, and they donât offer 24/7 customer service.
GEICO partners with military organizations to offer discounts on insurance including the Association of the United States Army, Navy League of the United States and the Armed Forces Benefit Association.
Those affiliated with any military branch may qualify for a 15% discount on their home insurance premium. Some may even be eligible for discounts from emergency deployment or through a professional military organization such as the Association of the U.S. Army.
One thing that sets GEICO apart is their Emergency Deployment Discount. Active duty military are eligible for this discount if they received orders to one of the Department of Defense designated areas and their vehicle is stored under their approved storage protection plan.
- Pros: Since GEICO partners with military organizations, they offer many discounts that their competitors may not have like discounts for bundling, smoke detectors and fire extinguishers in your home as well as security system discounts.
- Cons: All insurance products purchased through GEICO are required to go through an insurance underwriter. To finish getting their quote, GEICO customers must speak with an insurance agent.
Farmers Insurance offers an affinity discount from 2 â 8% to military personnel and veterans of the armed forces depending on the state. Their standard homeowners insurance policy includes dwelling coverage, which covers damage from weather. It also includes coverage of damage to detached garages and other additional structures on your property.
- Pros: This insurance provider offers affinity or professional discounts where customers in professions like the military are able to claim discounts on their home insurance policy.
- Cons: Family members who are distantly related to military personnel are more likely to be ineligible for insurance military discounts.
Progressive is another insurance company that offers discounts for veterans. They offer homeowners insurance through a network of insurers called the Progressive Home Advantage network, which means insurers vary by state. Since they use third-party insurers, it can be difficult to file a claim depending on who your provider ends up being.
Like the USAA, Progressive has a commitment to hiring current and former military and their spouses so they understand the needs of the customers they serve. Progressive offers 100% differential pay to active-duty service members and reservists, continuing medical benefits for active-duty reservists and their dependents, and continuous vacation time accrual during military leave of absence.
- Pros: Progressive offers discounts for current and former military members through third-party insurance providers. Some other discounts they offer include those for signing up early, insuring a new home, paying in advance and going paperless. They also offer a HomeQuote tool that helps customers compare different home insurance rates.
- Cons: Since Progressive doesnât offer their own home insurance, they partner customers with third-party providers. There are also better discounts for bundling home and auto insurance with competitors.
The VA Loan Guy: What Homeowner’s Insurance Policy Should You Choose?
FAQ
Is home insurance required for VA loans?
Is homeowners insurance required in VA?
Do VA loans require a mortgage insurance premium?
What is the VA 1% rule?
Who qualifies for a VA home loan?
Borrower: In this guide, this refers to the person applying for the VA home loan, (can be eligible Veteran, Service member, or surviving spouse). Certificate of Eligibility (COE): A statement from VA shows lenders that a borrower qualifies for the VA home loan based on service history and duty status.
What do VA Lenders look for in a home insurance policy?
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.
Does a VA loan cover homeowners insurance?
As a service to homeowners, the lender or servicer will escrow these portions and pay the annual bill for you. Homeowners insurance is a permissible cost that sellers can cover as part of your VA loan closing costs and concessions. Just keep in mind that it will count against the 4% seller concession cap.
What insurance do I need for a VA mortgage?
This is not an all-inclusive list, but Homeowner’s insurance – This is required for all mortgages. VA highly recommends that you shop around to find the coverage that can cover your home and personal property in the home, such as clothing and high-value items. Utilities and Maintenance – This may include water, electricity, and gas.
Do I need property tax insurance if I have a VA loan?
Talk with your lender/servicer about your property tax situation. I completely understand that Hazard Insurance is a must, and that VA loans require a year’s worth of homeowners insurance in advance at closing to build up escrow, followed by monthly payments to build the escrow for the subsequent year.
Do I need homeowner’s insurance before closing a VA loan?
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 dwelling, meaning the home and any attached structures, such as a deck.