In most cases. if you are financing your real estate purchase, the mortgage company or lender is going to require that the property be insured before proceeding to fund the transaction. 

Similar to financing a car or boat, the lender holds a lien on your house until mortgage is paid off. To safeguard their interest in the property, lenders want you to purchase financial protection in the form of a home insurance policy, in the event that a disaster occurs.

This amount of the coverage will vary depending on the lenders requirement, however at a minimum, they generally require a policy with enough coverage to pay for the cost of rebuilding the home from the ground up, should a disaster occur. 

The common practice is for the buyer to bring the homeowners insurance binder, or the policy itself to the closing. This binder is provided by the insurer and is proof that a policy in place that covers the property. In some cases, a letter from the insurer or some other proof of insurance coverage will suffice.

While the homeowner’s insurance will help protect the lenders financial interest, homeowner’s insurance helps protect the buyer’s financial interest as well. Consequently, even if a purchaser is acquiring a property without a needing to finance the property, known as an all cash deal, it is prudent to obtain homeowners insurance as well.

A standard homeowners insurance policy generally protects the property owner against hazards such as, fire and smoke damage, falling objects, like tree branches, theft and vandalism, frozen plumbing, damage from hailstorms and wind damage. explosions, and damage caused from the weight of ice, snow, or sleet.