Do VA Loans Require Homeowners Insurance?

For eligible service members, veterans, and surviving spouses, VA loans provide a pathway to homeownership. These loans offer distinct advantages, such as no down payment and the absence of private mortgage insurance (PMI), unlike many conventional loans. While VA loans provide unique benefits, they still require standard property protection.

Mandatory Homeowners Insurance for VA Loans

Homeowners insurance is a universal requirement for VA loans. Lenders mandate this insurance to safeguard their financial interest in the property, which serves as collateral for the loan. Although the Department of Veterans Affairs guarantees a portion of the loan, the lending institution still requires assurance that the physical asset is protected against damage or loss. Proof of adequate coverage is a necessary condition before the loan can close.

Essential Coverage for Your Property

A standard homeowners insurance policy includes several components protecting the property and homeowner’s financial stability. Dwelling coverage protects the physical structure of the home, including attached features like a garage or porch, against various perils such as fire, windstorms, and vandalism. Personal property coverage extends protection to belongings inside the home, such as furniture, electronics, and clothing, reducing financial stress if items are damaged or stolen.

Liability coverage provides financial protection if the homeowner is found legally responsible for bodily injury or property damage to others on their property. It helps with legal fees and medical expenses, contributing to financial stability. Loss of use coverage, also called additional living expenses, covers temporary living costs (e.g., hotel stays, meals) if the home becomes uninhabitable due to a covered event while repairs are underway. Standard policies typically exclude flood or earthquake damage; separate policies are required only in federally designated high-risk zones.

Integrating Insurance with Your VA Loan

Homeowners insurance premiums are managed through an escrow account. The lender collects a portion of the estimated annual insurance premium with each monthly mortgage payment, holding these funds in escrow. When the annual premium is due, the lender then pays the insurance company on the homeowner’s behalf, ensuring continuous coverage.

The homeowner carries the responsibility to maintain continuous insurance coverage throughout the life of the loan. Allowing coverage to lapse can lead to serious consequences, including the mortgage lender purchasing “force-placed” or “lender-placed” insurance. This type of policy is typically more expensive than what a homeowner could obtain independently and often provides less comprehensive coverage, primarily protecting only the lender’s interest in the property. Homeowners should inform their lender of any changes to their insurance policy or renewals to avoid potential lapses or issues with coverage.