A:Answer If you’re taking out a mortgage, you’ll probably need homeowners insurance before you can close on a new home. Your home insurance policy won’t go into effect until you close, but it needs to be in place, and, in many cases, you may need to prepay a full year of coverage.

Your lender drives the decision when it comes to insurance for the home they’re helping you buy. Typically, your lender will require you to:

• Buy enough insurance to cover rebuilding your home if it’s destroyed by fire or another disaster. They often call it “hazard insurance,” which is your home insurance policy’s dwelling coverage. If you live in a flood or earthquake zone, they may also require separate flood or earthquake insurance. 

• Pre-pay a year’s worth of homeowners insurance.

• Show proof of insurance at least three business days before closing. (Some insurers may want it as far ahead as 15 days before the closing date.)  

• Have a clause in your policy that the lender be informed beforehand if your policy is being canceled.

The closing process takes about one month, which should allow time to shop around and collect insurance quotes, choose an insurer, figure out how much coverage you want, pay your premium, and get your proof of coverage. Often, lenders will set up an escrow account that will hold your insurance payments (as well as prepaid property taxes) and take care of paying your insurance company from the account for you. 

You may decide you want more home insurance than the minimum required by your lender. Homeowners insurance helps you protect your investment in your home in case a fire, storm or other insurance-covered event causes damage or even destroys it. It also can insure your belongings. And the liability coverage in a home policy can help with medical and legal costs if someone else is hurt or their property damaged and you’re at fault. 

The rare instance when insurance is not required at closing is when a homebuyer is paying all cash, doesn’t need a mortgage, and doesn’t anticipate wanting help with repairs if disaster strikes. 

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