You cannot close a VA loan without homeowners insurance — the VA calls it hazard insurance. Here is what coverage is required, what it costs, how it gets paid, and where veterans can save real money.
What is required
The VA requires the property to be covered by hazard insurance sufficient to cover at least the loan amount or the replacement cost of the home, with the lender named as loss payee. The first year's premium is typically paid at or before closing as a prepaid item.
Flood insurance is required separately if the home is in a designated flood zone, and standard policies exclude flood and earthquake — those are separate policies in risk areas.
What it costs
Premiums vary enormously by state: a policy that costs $1,200 a year in the Midwest can cost $4,000 or more in Florida or coastal Texas, where wind and hurricane risk drive prices. Deductibles, roof age, and claims history all move the number.
Shop at least three quotes. Insurance is one of the few closing costs where comparison shopping saves hundreds a year, every year, for as long as you own the home.
How it gets paid
With an escrow account — standard on VA loans — one-twelfth of the premium is collected monthly and the servicer pays the renewal. At closing you prepay the first year plus a small escrow cushion.
When your premium rises at renewal, your escrow payment adjusts and your total monthly payment goes up even though your rate is fixed. Escrow analyses happen annually; expect the payment to drift upward over time.
Veteran-specific savings
USAA and Armed Forces Insurance are built for military families and often price well, but they are not automatically cheapest — quote them against standard carriers. Ask every insurer about military discounts, bundling with auto, and new-home or security-system credits.
One warning on deployment: standard policies can limit coverage if a home sits vacant. If you deploy or PCS and leave the home empty, tell your insurer and add a vacancy endorsement — an unoccupied home with the wrong policy can have claims denied.
The bottom line
Hazard insurance is non-negotiable: no policy, no closing. Budget the first year as a prepaid cost, shop carriers aggressively, and remember the premium is part of your real monthly payment forever. Veterans have good carrier options — use them, but verify with competing quotes.
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Jonathan Mullins
Mortgage Loan Officer · Army Veteran
Jonathan Mullins is an Army Veteran and Mortgage Loan Officer at Military Mortgage, specializing in VA home loans for Veterans, active-duty service members, and military families. He writes this learning center to make VA loan rules, entitlement, and the home-buying process easier to understand.
Learn more about Jonathan →Keep reading
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