When you buy a home, there’s a lot to think about—budgets, inspections, moving trucks, loan paperwork. But one thing that often gets overlooked in the whirlwind? Homeowners insurance.
It’s not just a box to check during the mortgage process. It’s a critical layer of financial protection—for you and for your lender.
Let’s break it down: what homeowners insurance actually covers, why lenders require it, and how it fits into your overall homeownership picture.
At its core, homeowners insurance is a policy that protects you from financial loss due to damage, theft, or liability claims related to your home. It typically includes several types of coverage bundled into one package:
This protects the structure of your home—walls, roof, foundation—against covered perils like fire, windstorms, or vandalism. If your home is damaged or destroyed, dwelling coverage helps pay for repairs or rebuilding.
This covers the belongings inside your home: furniture, electronics, clothing, appliances, and more. If they’re stolen or damaged by a covered event, you may be able to recover the cost to repair or replace them.
If someone is injured on your property or you accidentally cause damage to someone else’s property, liability coverage may help cover legal fees or medical expenses. This is often one of the most overlooked (yet valuable) parts of a policy.
If your home becomes uninhabitable due to a covered event, this part of your policy can help pay for temporary housing and meals while repairs are underway.
When you take out a mortgage, the lender is investing in your property, too. Until you’ve paid off the loan, they technically have a financial stake in your home. Homeowners insurance helps protect that investment.
If something happens—like a fire or major storm—your insurance policy ensures that the home can be repaired or rebuilt. Without insurance, both you and your lender would be exposed to significant risk.
That’s why most lenders require an active homeowners insurance policy before closing. In many cases, your first year’s premium is paid upfront and held in escrow as part of your monthly mortgage payment.
It’s important to understand that not everything is covered under a standard policy. Here are a few common exclusions:
Always review your policy carefully and ask questions if anything’s unclear. You want to know exactly what’s covered before you need to file a claim.
This depends on a few factors:
Many insurers offer tools or calculators to help estimate the right amount of coverage. Working with a knowledgeable insurance agent can make a huge difference here, especially if your home has unique features or if you’ve made upgrades.
As a loan officer, I always remind clients: homeowners insurance isn’t just another item on your closing checklist. It’s an essential part of protecting what may be your biggest investment.
Your insurance premium may be included in your escrow account, meaning it’s bundled into your monthly mortgage payment along with property taxes. This helps ensure it’s paid on time each year.
Homeowners insurance might not be the most exciting part of buying a home, but it’s one of the most important. It protects your property, your belongings, and your financial future.
If you're getting ready to buy—or if it's been a while since you reviewed your coverage—it’s worth taking a closer look. And if you’ve got questions about how insurance ties into your mortgage plan, let’s talk.
Because peace of mind? That’s something worth investing in.
At Ruoff Mortgage, we understand that buying a home is one of life’s biggest moments – not just as a financial decision, but a personal one. For more than 41 years, we’ve proudly helped families turn their dreams into reality. From our roots in northeast Indiana to now serving homebuyers throughout the Midwest, our focus has stayed the same: delivering exceptional service rooted in care, speed, and community. With an average 15-day clear-to-close time, our team is here to make your journey to homeownership as smooth and stress-free as possible. When you're ready to take the next step, we’re here to walk with you, every step of the way.