Published October 16, 2026 | Written by the Mission Realty Team.
Between a signed contract and the closing table, a homeowners insurance quote arrives, and your lender expects proof of a policy before it funds the loan. Each limit and deductible on it is tied to a specific kind of loss. This guide reads one line by line using the Virginia State Corporation Commission’s homeowners insurance consumer guide from its Bureau of Insurance, plus pages from the National Association of Insurance Commissioners, the Consumer Financial Protection Bureau and Fannie Mae.
It contains no premium figures. What a policy costs is a separate question, covered in our post on how homeowners insurance is priced in Richmond VA. The dollar examples below are round illustrations taken from or built on the SCC’s own examples, not Richmond averages.
Why your lender asks for the policy before closing
The CFPB explains that when you have a mortgage, your lender wants the property protected, so lenders generally require proof of homeowner’s insurance. You can shop for the policy separately and choose the provider and plan. Many buyers pay through escrow as part of the monthly mortgage payment, a setup covered in our guide to mortgage escrow accounts. The projected cost shows on page one of your Loan Estimate under Projected Payments, and the CFPB page on homeowner’s insurance still suggests doing your own research on cost.
If coverage lapses, the lender may buy a policy for you after advance notice. The CFPB warns that such a policy may protect only the lender and may cost more than one you buy yourself. Homeowner’s insurance is also not mortgage insurance, which is a different product explained in our private mortgage insurance guide.
Coverage A: the dwelling limit
Many quotes label the dwelling limit Coverage A and run through Coverage F. The SCC guide uses plain names instead, so this post matches them: dwelling (A), other structures (B), personal property (C), loss of use (D), liability (E) and medical payments (F).
Coverage A insures the house itself. The SCC advises a dwelling limit of at least 80% of replacement cost, which it defines as the money needed to rebuild using current materials and labor. That figure can differ a lot from what you paid for the home, because purchase price includes land and market conditions. The 80% line matters even for small claims. Below it, the guide says, the insurer owes only the larger of the actual cash value of the loss or a prorated share based on the insurance you bought compared with the insurance you should have bought.
The SCC also advises asking whether the company offers an inflation guard endorsement, since replacement cost rises over time and a limit that is adequate at closing can slip behind.
Coverages B, C and D: other structures, belongings and loss of use
These three limits are usually set as percentages of Coverage A. Using the SCC’s illustration of a $100,000 dwelling limit, which was chosen for easy arithmetic and says nothing about Richmond rebuild costs, the typical figures work out as follows.
Other structures (B) cover buildings not attached to the house, such as a detached garage or toolshed, usually at 10% of the dwelling limit, or $10,000 in the illustration. Personal property (C) is usually 50% of the dwelling limit, or $50,000, with a smaller amount away from home, such as 10% of the contents limit. Certain items carry small caps, among them jewelry, furs, cash and collections, and the guide suggests scheduling valuables separately.
Loss of use (D), which the guide calls additional living expenses, pays for temporary housing when a covered loss makes the home unlivable. The typical limit is up to 20% of the dwelling limit, and it pays only costs above your normal expenses. If you stay with family and spend nothing extra, nothing is paid.
Ask for our Richmond closing-timeline checklist, which shows where the homeowners insurance quote, binder and proof of coverage fit between contract and closing.
Coverages E and F: liability and medical payments
Liability (E) pays when you are legally responsible for injuring someone or damaging their property, and it usually pays for your legal defense. It does not cover claims arising from your job or intentional harm, and it excludes most motor vehicle use. The guide says the basic limit is usually $100,000 per occurrence and suggests asking what a higher limit adds.
Medical payments (F) cover reasonable medical expenses for a guest hurt at your home regardless of fault, usually up to $1,000 per person, but not for you or your household.
Replacement cost versus actual cash value
The NAIC explains the difference this way. Actual cash value (ACV) pays to repair or replace property based on its value after depreciation for age and wear, so it often falls short of full replacement. Replacement cost value pays to repair or replace with materials of like kind and quality, and the NAIC notes this differs from market value, which includes land.
In practice the two often combine. The SCC says insurers commonly pay a dwelling claim first at ACV and pay the remainder once repairs are done, provided you tell the insurer of your intent to repair or replace within 6 months of its last ACV payment. Personal property is usually settled at ACV unless you buy replacement cost coverage, and the SCC’s example is a $200 suit that would cost $250 today: ACV pays well under $200, while replacement cost pays $250.
Two other items to look for are water and sewer backup coverage and building ordinance or law coverage. Virginia requires companies to offer both, and both may cost extra. Standard policies generally exclude flood, covered in our post on flood insurance for Richmond buyers.
Percentage wind and hail deductibles
Besides the main deductible, many insurers apply a separate deductible to wind, hail or named storms. The SCC explains that this one may be a flat amount or a percentage of the dwelling limit, and the percentage version takes the Coverage A limit as its base, not the size of the loss.
The guide’s example uses a $200,000 dwelling limit and $5,000 of hurricane damage. At a 2% deductible you pay the first $4,000 and the insurer pays $1,000. At 5% you pay the first $10,000 and the insurer pays nothing toward the $5,000 loss. The same dwelling limit and the same damage produce very different outcomes, so find the wind and hail line on every quote and see which form it takes.
Fannie Mae treats roofs differently from the rest of the house, as the lender section below explains, and our post on what a roof’s age does to a Richmond sale covers how roof age affects insurance and financing.
What lenders require of the policy
Requirements vary by loan program, so ask your loan officer for the specific list. Fannie Mae’s Selling Guide gives a clear baseline for loans it buys. Its property insurance requirements for one- to four-unit properties call for a Special coverage form or equivalent that includes at least fire or lightning, explosion, windstorm (including named storms), hail, smoke, aircraft, vehicles, and riot or civil commotion.
The policy must also cover on a replacement cost basis, with roofs the exception: roofs must be insured but not at replacement cost. The maximum deductible for any required peril is 5% of the property insurance coverage amount, and that cap applies to each separate deductible, so a wind and hail deductible above 5% would not meet it. Fannie Mae also has separate rules for condo units, and our post on the condo master policy and your HO-6 explains who insures what in an association.
Claims history and hard-to-insure homes
Insurers also weigh claims history. The SCC notes that companies review the size and frequency of losses when deciding whether a policy still qualifies, which is why the CLUE report and a buyer’s insurer deserve a look before you go under contract. If a home needs repairs, the SCC says you may be unable to buy a usual homeowners package and might need separate policies for the property and for liability. The Virginia Property Insurance Association offers limited coverage as a last resort, with generally higher premiums and fewer protections.
A review checklist for the weeks before closing
Compare quotes with the same limits and deductibles on each, since the SCC cautions against buying on price alone and points to financial stability, service, underwriting and claims handling. Ask for the dwelling limit, the wind and hail deductible, the replacement cost terms and the water backup and ordinance or law offers in writing. Send your loan officer the declarations page early, and ask when the lender needs proof. If you have not chosen a lender, our featured lenders page is a starting point, and our buyer services explain how we coordinate the closing timeline.
The coverage letters read the same whether you are buying in the city of Richmond, Chesterfield County or Henrico County. When you are ready to see homes, start with our property search.
Frequently asked questions
Do I have to buy insurance from the company my lender suggests?
No. The CFPB says you can shop separately for homeowner’s insurance and choose the provider and plan that suit you, as long as the policy meets your lender’s requirements.
What is the difference between a named peril and an open perils policy?
The SCC says a named peril policy covers only the causes of loss listed in it, while an open perils policy covers all causes except those it excludes. It advises asking for a price on both, because the extra premium for open perils is often relatively small.
What do HO-3 and HO-6 mean on a quote?
These are policy forms. The SCC lists HO-3 as the Special Form, which usually covers the building against all perils except those excluded, and HO-6 as the form for condominium unit owners.
Does homeowners insurance cover flood damage?
Generally no. The SCC says Virginia homeowners policies generally exclude flood, and coverage is available through the National Flood Insurance Program, usually with a 30-day waiting period before a new policy takes effect. Plan that into your closing schedule.
What if no company will insure the home?
The SCC advises trying other companies, since underwriting rules differ, and notes that you may be able to buy separate property and liability policies. The Virginia Property Insurance Association is a last resort with generally higher premiums and more limited coverage.
Is there a grace period if a payment is late?
The SCC says no. A company may cancel a policy for nonpayment if a payment is even one day late, so ask whether your premium will be paid through escrow.
How long does an insurer have to settle a claim?
The SCC says the company should acknowledge a claim within ten working days. No specific settlement deadline exists, but it should tell you the reasons for additional time every forty-five days.
We will send our closing-timeline checklist so you know when the insurance quote, binder and proof of coverage are due before you close.
