Homeowners insurance in Massachusetts: coverage and options

What the lender needs, and when

Your lender will not fund the loan until it has verified a valid policy on the home. A certificate or declarations page signed by the insurer works; your lender will give you the exact mortgagee clause to put on the policy. For a condo, the lender also needs the association’s master policy or a certificate showing your unit is covered. Ask your agent to send these to the lender and the closing attorney at least a week before closing, so insurance does not hold up the closing at the last minute.

Get quotes in the first days after the offer is accepted, while you still have contingencies. A quote can reveal something about the house, such as the age of the roof, wiring or a past claim, that you want to know before the inspection deadline passes.

Keep the policy in force for the life of the loan. If it lapses, the servicer may buy coverage for you and charge you for it, usually at a higher cost. Federal rules require the servicer to send you a written notice at least 45 days before charging, followed by a reminder, and to stop if you show proof of continuous coverage.

Which policy fits which home

Insurers sell homeowners coverage on standard forms. Their names vary, so read the declarations page and the form, not just the label. For a one- to four-unit home, Fannie Mae expects the policy to be on a Special coverage form or its equivalent.

Condos: the master policy and your unit policy

A condo association may insure the common areas in its own name, and each owner keeps the right to insure their unit. Where the line falls between the two is set by the master deed and bylaws. Some master policies stop at the bare walls; others include fixtures and finishes inside the units. Massachusetts law gives unit owners the right to inspect the association’s records, including all current insurance policies. Ask for the master policy’s declarations page during your review of the condo documents.

Fannie Mae requires a unit-owner policy when any part of the unit interior or improvements is not covered by the master policy, or when the master policy has a per-unit deductible. Set your coverage to fill those gaps, including any part of a master policy deductible that could be charged to your unit, and ask the agent to show you where each item is covered.

In a two- or three-family condo with no manager, check that the master policy actually exists and is paid. Our condo documents guide covers the rest of that review.

How much coverage, and which options

Dwelling coverage should equal the full cost to rebuild the house, which is different from its market value: market value includes the land and moves with the market. If coverage falls below 80 percent of replacement cost, the insurer may pay less on a claim, so review the limit every year or after a renovation.

With a Fannie Mae-backed loan, the dwelling must be insured on a replacement cost basis, which pays to rebuild or repair with materials of similar kind and quality. Roofs are an exception and may be covered at actual cash value, which takes age and wear into account and often pays less than the repair costs. Confirm the terms with your lender before you bind the policy. A higher deductible lowers the premium, but only choose one you can pay after a loss.

Ask about a few endorsements that matter for older Massachusetts houses. Most policies offer limited or no coverage for sewer or drain backup and sump pump overflow, so ask for that endorsement if the house has a finished basement. An ordinance or law endorsement pays the extra cost of rebuilding to today’s codes. Keep a photo inventory of your belongings, stored outside the house.

Flood insurance

Homeowners policies do not cover flood. Look up the address on FEMA’s Flood Map Service Center before you make an offer. If the home is in a Special Flood Hazard Area, a zone beginning with A or V, a federally regulated or insured lender will require flood insurance, either through the National Flood Insurance Program or an equivalent private policy. Outside those zones a lender can still require flood coverage, so ask before you decide, and ask the seller about any history of water in the basement.

A new NFIP policy normally takes effect after a 30-day wait. That wait does not apply when the policy is bought in connection with making, increasing, extending or renewing a loan, so buy it through the closing, not afterward. Ask the seller whether they carry flood insurance and how much it costs; the premium belongs in your monthly budget.

Rentals, multi-family homes and the FAIR Plan

If you live in one unit of a two- or three-family house and rent the others, tell the insurer how many units are rented and ask which policy form fits. Ask tenants to carry renters insurance for their own belongings and liability. A home you do not live in at all needs a dwelling or landlord policy; our guides on renting out a home cover the details.

If voluntary insurers will not write the home, the Massachusetts Property Insurance Underwriting Association, known as the FAIR Plan, provides basic property insurance to eligible applicants who cannot get it in the voluntary market. Insurers that write basic property insurance in Massachusetts are required to take part in it. Its coverage is more limited than a typical policy, so compare it with any voluntary offer, and keep asking agents for voluntary coverage once the issue that led to the refusals is fixed.