Buying a House in Missouri? Getting Home Insurance in Place

By Yolanda Ponce · More articles

Missouri home

The lender will not close on a Missouri house with no insurance, and the week of closing is a bad time to learn the roof will not pass underwriting. Start the quote while you still have the inspection.

When the policy has to exist

Most mortgage companies require a homeowners policy as a condition of the loan. The Texas Department of Insurance says that about Texas loans, and Missouri lenders behave the same way in practice: they want a bound policy, with the lender listed as mortgagee, before they fund. A quote is not that policy. A binder or declarations page with the correct mortgagee clause is.

Put the insurance deadline next to the inspection deadline in the contract. You want the inspection report before you ask a company to insure the house, because the report is where curled shingles, an old electrical panel, or a leaking water heater show up. If you bind first and the inspection finds those later, you may be stuck with a house the insurer will nonrenew, or with a claim the condition of the house will complicate.

Ask the seller for the current declarations page and for any claim history they will share. You cannot force a stranger’s loss report. You can ask. Tennessee’s insurance department points consumers to CLUE, the Comprehensive Loss Underwriting Exchange, as the report companies use. Missouri underwriters use that same kind of loss history. Prior water and hail claims on that address follow the house more than they follow the seller.

What the company is actually pricing

The premium is not the sale price. Insurers insure the cost to rebuild the dwelling. That number can sit above or below what you are paying the seller. Land is not part of it. A small house on an expensive lot can cost less to rebuild than the contract price. A large older house on a cheap lot can cost more.

Actual cash value is replacement cost minus depreciation. On an older roof, that difference is the part of a hail or wind claim you pay yourself, on top of the deductible. If the lender wants replacement cost on the dwelling, ask for that form, not an actual-cash-value dwelling policy, and ask what percentage of rebuild cost you must carry. Some forms pay replacement cost on the dwelling only if you insure to a stated percentage of the rebuild cost. Get that percentage from the quote, in writing.

The deductible is the amount you pay before the company pays. A higher deductible lowers the premium. A percentage deductible is a percent of the dwelling limit, not of the claim. On a $300,000 dwelling limit, a 1 percent wind or hail deductible is $3,000. That is an example, not a Missouri average. Read the quote for whether wind and hail have their own deductible.

If the standard companies say no

The Missouri FAIR Plan, the Missouri Property Insurance Placement Facility, exists for property that has not been able to get insurance in the normal market. It was established in October 1969. It says it is not meant to compete with voluntary companies. A Missouri-licensed agent has to submit the application, after a diligent effort to place the risk in the regular market.

For a one- to four-family dwelling, the plan’s DP 00 01 is a named-peril policy. The perils it lists are fire, lightning, explosion, windstorm, hail, riot or civil commotion, aircraft, vehicles, smoke, volcanic eruption, and vandalism and malicious mischief. Theft is optional, from $1,000 to $25,000, and only if contents, extended coverage, and vandalism are already included. The maximum for buildings and contents combined is $200,000. That cap matters on a house whose rebuild cost is higher. The plan’s summary does not say the cap stretches. If the house does not fit, you need a voluntary company, not a hope that the maximum is flexible.

Flood is not in that named-peril list. If the lender, or the elevation, says you need flood insurance, buy it separately. The FAIR Plan phone numbers published on its site are 314-421-0170 and, inside Missouri, 800-392-7240. The address is 11116 S Towne Square, Suite 303, St. Louis, MO 63123.

Owner, landlord, or both

A homeowners policy assumes you live there. If you will rent the house out on day one, tell the agent before you bind. A landlord policy is a different contract. It covers the building and your liability as owner, and it does not cover the tenant’s furniture. Binding a homeowners form on a rental is how a later claim gets disputed over occupancy. If you will live there and rent a room, say that too. Occupancy is an underwriting fact, not a detail for after closing.

A house you are buying to flip, or to hold vacant while you renovate, is a third category. Vacant houses are a common reason for a decline. Say how long the house will be empty. Do not bind an owner-occupied form and then leave it dark for four months.

The week before closing

  • The named insured should match the buyers on the deed. A policy in one name, when two people are on the mortgage, is a cleanup you do not want on funding day.
  • The mortgagee clause should match the lender’s written instructions, including the loan number if they require it.
  • The dwelling limit should match the rebuild figure you and the agent agreed on, not a round number copied from the listing.
  • The effective date should be the closing date, or earlier if you take possession early. Coverage that starts the day after closing leaves the night of closing bare.
  • Ask for the paid receipt or the binder the lender named. An unpaid application is not proof of insurance.

Do not cancel a policy on the house you are selling until that sale has funded and you no longer own it. And do not cancel a renter’s policy on the apartment until you have the keys and the new homeowners policy is in force. Overlap by a day is cheaper than a gap.

What to hand the agent

The agent can quote faster with the address, year built, square footage, roof material and approximate age, updates to wiring and plumbing and heat, the distance to a fire hydrant if you know it, and whether a dog lives there. Photos of the roof and the electrical panel save a week of “we’ll get back to you.” If the inspection is already done, send it. Underwriters would rather read the inspector’s note than discover the same fact after a claim.

Shop more than one company. TDI’s shopping advice, written for Texas buyers, still fits a Missouri purchase: compare the coverage, not only the premium, ask what discounts apply, and confirm the agent and the company are licensed before you pay. In Missouri that check runs through the Department of Commerce and Insurance. A low premium on a policy that excludes the roof is not a bargain.

Questions buyers ask

Can I take over the seller’s policy?

Almost never as a simple handoff. The seller’s policy insures the seller. You need a policy in your name, with your lender. The seller’s premium refund is their business with their company.

The roof is old but it does not leak. Will that pass?

Maybe not. Underwriters insure the next windstorm, not today’s dry ceiling. Ask for a yes or no while you can still negotiate repairs with the seller. A decline three days before closing is a contract problem, not just an insurance problem.

Does homeowners insurance cover flood in Missouri?

Not on a standard policy, and not on the FAIR Plan named-peril list quoted above. Flood water is a separate policy.

What if the FAIR Plan maximum is too low for this house?

Then the FAIR Plan is not a complete answer. A $200,000 combined building-and-contents cap will not insure a dwelling that costs more than that to rebuild. Keep looking in the voluntary market, or talk to the seller about the condition that caused the decline.

If you are inside a Missouri contract, start the home quote before the inspection period ends.

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