Your lender emails: "We need proof of homeowners insurance before closing." You have five days. You've never bought insurance before. What coverage do you need? How much? Which company? What if you're in a flood zone?
Homeowners insurance is required by your lender and protects your largest investment. But not all policies are equal. Understanding what you need, what's optional, and what's excluded helps you get proper coverage without overpaying.
In this article, you'll learn:
- What homeowners insurance covers (and doesn't cover)
- Required coverage amounts in Washington
- How to get quotes and choose a policy
- Seattle-specific risks and endorsements
- Earthquake, flood, and sewer backup coverage
- How to save money on premiums
- Timeline for getting insurance before closing
This article is for you if: You're under contract and need to secure homeowners insurance before closing.
Table of Contents
- What Is Homeowners Insurance?
- Standard Homeowners Policy (HO-3)
- Required Coverage Amounts
- Seattle-Specific Risks and Endorsements
- How to Get Quotes and Choose Policy
- How to Save Money on Premiums
- Summary: Key Takeaways
- Next Steps
- Additional Resources
What Is Homeowners Insurance?
Basic Definition
Homeowners insurance:
- Protects your home and belongings
- Covers liability if someone is injured
- Required by mortgage lenders
- Paid annually or monthly (via escrow)
Purpose:
- Rebuild if home is damaged or destroyed
- Replace personal belongings
- Pay for temporary housing
- Protect against lawsuits
Not the same as:
- Title insurance (protects ownership)
- Mortgage insurance (protects lender if you default)
- Home warranty (covers appliance repairs)
Why Lenders Require It
Lender's perspective:
- They have a financial interest in your home
- If home is destroyed, they need to be repaid
- Insurance ensures home can be rebuilt
- Protects their collateral
Required before closing:
- Must have policy in place
- Lender must be listed as mortgagee
- First year premium usually paid at closing
- Proof of insurance required
Standard Homeowners Policy (HO-3)
What's Covered
Dwelling coverage (Coverage A):
- Structure of your home
- Attached structures (garage, deck)
- Built-in appliances
- Plumbing, electrical, HVAC
Other structures (Coverage B):
- Detached garage, shed, fence, driveway
- Typically 10% of dwelling coverage
Personal property (Coverage C):
- Furniture, clothing, electronics, appliances
- Typically 50–70% of dwelling coverage
Loss of use (Coverage D):
- Hotel costs if home is uninhabitable
- Temporary housing, additional living expenses
- Typically 20% of dwelling coverage
Personal liability (Coverage E):
- If someone is injured on your property
- Legal defense costs, medical payments
- Typical: $100,000–$500,000
Medical payments (Coverage F):
- Small injuries to guests, no fault required
- Typical: $1,000–$5,000
What's NOT Covered
Standard exclusions:
- Flood damage (need separate policy)
- Earthquake damage (need separate policy or endorsement)
- Sewer backup (need endorsement)
- Mold (limited coverage)
- Maintenance issues, wear and tear
- Intentional damage
Seattle-specific concerns:
- Water damage from flooding: NOT covered
- Earthquake damage: NOT covered (unless you add it)
- Sewer backup: NOT covered (unless you add it)
- Landslide: May or may not be covered (check policy)
Required Coverage Amounts
Dwelling Coverage (Coverage A)
How much you need:
- Enough to rebuild your home
- NOT the purchase price or market value
- Based on construction costs in your area
Seattle example:
- Purchase price: $900,000
- Land value: $400,000
- Dwelling coverage needed: $500,000–$600,000 (rebuild cost)
Replacement cost vs actual cash value:
- Replacement cost: Rebuilds with new materials (recommended)
- Actual cash value: Pays depreciated value (cheaper premium, less coverage)
Guaranteed replacement cost:
- Pays to rebuild even if costs exceed coverage limit
- More expensive but best protection
- Recommended for Seattle (high construction costs)
Other Coverage Amounts
Other structures (Coverage B):
- Typically 10% of dwelling coverage
- Increase if you have expensive detached structures
Personal property (Coverage C):
- Typically 50–70% of dwelling coverage
- Increase if you have expensive belongings
- Consider scheduled property endorsement for jewelry, art, etc.
Loss of use (Coverage D):
- Typically 20% of dwelling coverage
- Increase if Seattle housing costs are high
Liability (Coverage E):
- Minimum: $300,000
- Recommended: $500,000–$1,000,000
- Consider umbrella policy for $1M+ coverage
Seattle-Specific Risks and Endorsements
Earthquake Coverage
The risk:
- Seattle is in earthquake zone (Cascadia Subduction Zone)
- Major earthquake could cause $50,000–$200,000+ damage
- Standard policy does NOT cover earthquake damage
Earthquake insurance:
- Separate policy or endorsement
- Cost: $800–$3,000/year (typical)
- High deductibles: 10–25% of dwelling coverage
- Example: $600,000 dwelling, 15% deductible = $90,000 out of pocket
Should you buy it?
- Consider if you can't afford to rebuild
- Consider if home is older (more vulnerable)
- Consider if you have large mortgage
- Skip if you have significant savings
Where to buy:
- Through your homeowners insurance company
- Washington State Earthquake Insurance (CEA equivalent)
Flood Insurance
The risk:
- Seattle has flood zones near water
- Standard policy does NOT cover flood damage
- Even outside flood zones, flooding can occur
Flood insurance:
- Through National Flood Insurance Program (NFIP)
- Required if in high-risk flood zone (with mortgage)
- Cost: $400–$2,000/year (typical)
- Coverage limits: $250,000 dwelling, $100,000 contents
Check your flood zone:
- FEMA Flood Map Service
- Enter your address
- Zones A, AE, VE = high risk (insurance required)
- Zones B, C, X = moderate/low risk (insurance optional)
Where to buy:
- Through insurance agent
- FloodSmart.gov
- 30-day waiting period (plan ahead)
Sewer Backup Coverage
The risk:
- Seattle's old sewer system
- Tree roots, heavy rain cause backups
- Cleanup costs: $5,000–$20,000
- Standard policy does NOT cover
Sewer backup endorsement:
- Adds coverage for sewer/drain backup
- Cost: $50–$150/year
- Coverage: $5,000–$25,000
- Highly recommended for Seattle
Water Damage Endorsement
The risk:
- Seattle's rainy climate
- Water damage from leaks, seepage
- Standard policy has limitations
Water damage endorsement:
- Broader coverage for water damage
- Cost: $50–$200/year
- Covers gradual leaks, seepage
- Recommended for older homes
How to Get Quotes and Choose Policy
Timeline
Start early:
- Begin shopping 30 days before closing
- Need policy in place at closing
- Allows time to compare quotes
Typical timeline:
- Day 1: Request quotes from 3–5 companies
- Day 3–5: Receive quotes
- Day 7: Compare and choose
- Day 10: Purchase policy
- Day 14: Receive proof of insurance
- Send to lender
Where to Get Quotes
Independent insurance agents:
- Represent multiple companies
- Can compare quotes for you
- Recommended for first-time buyers
Direct from insurance companies:
- State Farm, Allstate, Farmers, etc.
- May be cheaper
- Less personalized service
Online comparison sites:
- Policygenius, Insurify, The Zebra
- Quick quotes from multiple companies
- Good for comparison shopping
Recommended for Seattle:
- Get quotes from at least 3 companies
- Include local and national companies
- Ask about earthquake and sewer backup
What to Compare
Coverage amounts:
- Dwelling coverage
- Personal property
- Liability
- Deductibles
Endorsements included:
- Replacement cost vs actual cash value
- Guaranteed replacement cost
- Water damage
- Sewer backup
Price:
- Annual premium
- Monthly payment (if via escrow)
- Discounts available
Company reputation:
- Financial strength rating (A.M. Best)
- Customer service reviews
- Claims handling reputation
Discounts:
- Multi-policy (bundle with auto)
- Security system
- Fire alarm
- New home
- Claims-free
How to Save Money on Premiums
Increase Deductible
How it works:
- Higher deductible = lower premium
- $500 deductible: Higher premium
- $2,500 deductible: Lower premium (save 15–30%)
Consider:
- Can you afford higher deductible?
- How much do you save annually?
- Break-even point
Example:
- $500 deductible: $1,500/year
- $2,500 deductible: $1,200/year
- Savings: $300/year
- Break-even: 6.7 years if you have one claim
Bundle Policies
Multi-policy discount:
- Bundle home and auto insurance
- Save 10–25% on both policies
- Simplifies billing
Example:
- Home: $1,500/year
- Auto: $1,200/year
- Total: $2,700/year
- With bundle discount (15%): $2,295/year
- Savings: $405/year
Improve Home Security
Discounts for:
- Security system (5–20% discount)
- Fire alarm (5–10% discount)
- Smoke detectors (5% discount)
- Deadbolt locks (5% discount)
Example:
- Premium: $1,500/year
- Security system discount (10%): $150/year savings
- Fire alarm discount (5%): $75/year savings
- Total savings: $225/year
Maintain Good Credit
Credit-based insurance score:
- Better credit = lower premium
- Can save 20–30%
- Check credit before shopping
Stay Claims-Free
Claims-free discount:
- No claims for 3–5 years
- Save 10–20%
- Consider paying small claims out of pocket
Shop Around Annually
Rates change:
- Compare quotes every 1–2 years
- Can save 10–30% by switching
- Loyalty doesn't always pay
Summary: Key Takeaways
- HO-3 policy is standard for single-family homes
- Dwelling coverage should cover rebuild cost, not purchase price
- Earthquake NOT covered - need separate policy ($800–$3,000/year)
- Flood NOT covered - need NFIP policy ($400–$2,000/year)
- Sewer backup NOT covered - add endorsement ($50–$150/year, highly recommended)
- Get quotes 30 days before closing from 3+ companies
- Save money with higher deductible, bundling, security systems
- Required before closing - lender must be listed as mortgagee
Next Steps
- Check flood zone - FEMA Flood Map
- Get quotes - Contact 3–5 insurance companies
- Compare coverage - Not just price, but coverage amounts and endorsements
- Add endorsements - Sewer backup (highly recommended), water damage
- Consider earthquake - If you can't afford to rebuild
- Purchase policy - At least 2 weeks before closing
- Send proof to lender - Declarations page with lender listed
Related articles:
Additional Resources
Get quotes:
- Policygenius
- Insurify
- Local independent agents
Flood insurance:
Earthquake insurance:
- Washington State Earthquake Insurance
- Through your homeowners insurance company
Company ratings:
- A.M. Best - Financial strength ratings
- J.D. Power - Customer satisfaction
Disclaimer: This article provides general information about homeowners insurance and should not be considered insurance or legal advice. Insurance requirements and coverage vary by lender, property, and situation. Consult with a licensed insurance agent for guidance specific to your circumstances.