What Kind of Homeowners Insurance Do You Need for a VA Loan

What Kind of Homeowners Insurance Do You Need for a VA Loan

Homeowners Insurance VA Loan: homeowners in the military or who have served in the military in the past may obtain home insurance, either as a condition of taking out a VA mortgage loan or simply for financial protection. Fortunately, homeowners’ insurance providers provide several policy advantages and savings explicitly tailored for military families.

This article looks at the best insurance alternatives for active-duty military and veterans, as well as the questions you should ask while evaluating homeowners insurance.

Related Article: Understanding Homeowners Insurance: A Guide

Basic Homeowners Insurance Coverage

Your homeowners insurance will compensate you for damage to or destruction of your home and personal belongings caused by an event covered under your policy. In some cases, you will also be covered if you injure another person or damage property. Homeowner’s insurance has three primary functions:

  • Make repairs to your house, yard, and other structures.
  • Replace or repair your personal belongings.
  • Ensure you’re protected if you’re legally liable for the injury or damage of someone else.

In general, homeowners insurance policies cover six types of risks.

Coverage type What it does Typical amount
Dwelling Insures damage to a home and its attached structures, such as a porch. An amount sufficient to rebuild your home.
Other structures It would cover any structures on your property that stand alone, such as a fence or shed. Coverage of 10% of dwellings.
Personal property It covers the repair or replacement of stolen or damaged belongings. Coverage ranges from 50% to 70% of dwellings.
Additional living expenses During the repair of your home, temporary living expenses will be paid. 20% of the dwelling is covered.
Liability Pays when someone is injured or damaged by negligence or inadvertence. $100k to $500k.
Medical payments Whether third parties caused the injury or not, it pays to treat the victim. The insurance also covers someone hurt by you, a family member or a pet. Between $1,000 and $5,000.

VA Home Loan Requirements

Applicants must meet the Department of Veterans Affairs (VA) minimum service criteria, have a valid Certificate of Eligibility (COE), and meet the lender’s credit and income requirements.

You may still be qualified for a VA loan if you don’t meet the basic service requirements. In these circumstances, eligibility is determined by the type of discharge. It is best to speak with a VA lender if you are unsure of your service status.

Lenders of veteran loans typically require insurance payments be held in escrow, meaning a third party holds property or money until a condition is met.

Natural calamities such as floods and earthquakes are often not covered by standard homeowners insurance policies. Therefore, you will need to obtain additional coverage in the event of a natural disaster.

VA loan flood insurance requirements: in addition, VA homeowners who acquire a property in a designated flood hazard region identified by FEMA (Federal Emergency Management Agency) must purchase flood insurance.

Also Read: Steps to Buying a Home With a VA Loan

Other Types of Homeowners Insurance You Might Want

There are numerous types of VA loan homeowners insurance, referred to as “coverage forms.” Understanding the differences is important because some types give more comprehensive coverage.

HO-1: Basic Form

This is the basic and most limited type of homeowners insurance for single-family homes.

HO-2: Broad Form

This is a general insurance policy and a slight upgrade over HO-1. Your home is typically covered at its replacement cost under this policy. However, your personal property will only receive coverage for its actual cash value.

HO-3: Special Form

This is the most popular type of homeowners insurance on the market, with broader coverage than the HO-2. It accounts for the vast majority of policies for single-family homes.

HO-4:Contents Broad Form

This is an insurance policy designed specifically for renters.

Related:Does Home Insurance Cover Couples if You Aren’t Married?

HO-5: Comprehensive Form

This is the second most common policy type for single-family homes and the most comprehensive form of homeowners insurance.

HO-6: Unit-owners Form

This type of coverage typically covers condo owners.

HO-7: Mobile Home Form

This homeowners insurance is specifically designed for mobile or manufactured homeowners.

HO-8: Modified Coverage Form

A unique form of homeowner’s insurance intended for older homes that do not meet standard insurer requirements.

Homeowners Insurance Costs

National Association of Insurance Commissioners (NAIC) statistics show that the average cost of homeowners insurance in the United States is $1,249 per year or $104 per month. However, the cost of homeowners insurance varies greatly depending on where you live, how old your property is, the cost of restoring it, and your claims history.

For instance, residents of a location with a high risk of extreme weather or wildfires may find their insurance rates higher because their chances of filing a claim are higher.

Deductible

A homeowner’s policy usually includes an insurance deductible, which is the amount you must pay before your insurer begins to pay. Usually, the deductible is one of these:

  • A fixed sum of money, such as $500 or $1,000.
  • A proportion of the home’s insured value, such as 1% or 2%.

When you get a claim check, your insurer deducts your deductible amount. For instance, if you have a $1,000 deductible and your insurer approves your claim for $10,000, they will pay $9,000 while you are responsible for the remaining $1,000.

Takeaway Tip: Your rate will generally be lower if you choose a bigger deductible. However, filing a claim will result in a more significant financial burden. A greater deductible, on the other hand, means you’ll pay a higher premium, but your insurer will cover nearly the entire bill in the event of an accident.

Where to Find Discounts for Veterans on Homeowners Insurance

If you’re an active-duty member of the armed services or a veteran, several insurance companies provide reductions on your home’s insurance premiums based on your career.

The following is a list of companies that offer discounts to military members.

1. Famers

With Farmers, you can reduce your premiums by taking advantage of the affinity discount. This discount applies to employees, retirees, members of approved businesses, and professional groups. Armed forces personnel and veterans are among the professions that qualify for the discount.

2. Liberty Mutual

According to their website, veterans and those serving in the armed forces receive a military discount from Liberty Mutual.

3. GEICO

The GEICO website details that active service members, veterans, and the National Guard and Reserves members may qualify for a 15% military discount.

(Note: Remember that not all deals are accessible in every state. Check with your insurance company to see if any of the following savings are available for your coverage.)

How Much Homeowners Insurance Do You Need

Buying home insurance for the first time may leave you unsure about how much coverage to purchase. In general, you should obtain enough dwelling insurance to cover the expense of restoring your house to its original state.

Personal property insurance should be sufficient to cover the worth of your items, such as furniture and clothing. You should determine how much liability insurance you need based on the value of your financial assets that may be at risk in the event of a lawsuit.

Final Thoughts—Homeowners Insurance VA Loan

Consider USAA, Armed Forces Insurance, or select a company that offers military members discounts on home insurance coverage when looking for the best homeowners insurance for military veterans.

It’s always a good idea to study your homeowners policy thoroughly to understand your coverage. Still, it’s especially vital for active military personnel who intend to deploy. You’ll want to be aware of any coverage gaps.

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