Buying a House in Tennessee? Getting Home Insurance in Place

Tennessee home

Buying a house in Tennessee means having a bound homeowners policy by closing, with the rebuild cost and the roof settled before the lender asks for the binder.

Closing is a coverage deadline

Mortgage companies require insurance before they fund. They want the policy in the buyers’ names, the lender named as mortgagee, and an effective date that covers the closing. A quote you liked on a website is not that document. Neither is the seller’s policy. The seller’s company insures the seller. You need your own.

Line the insurance work up with the inspection, not with the moving truck. The inspection is when you learn the roof age, the electrical panel, and whether water has already been in the house. Underwriters price those facts. If you wait until the lender’s “we need the binder tomorrow” email, you get whatever company will say yes overnight, or you get a delay.

The Tennessee Department of Commerce and Insurance points buyers to CLUE, the Comprehensive Loss Underwriting Exchange, for loss history. Ask the seller what claims have been filed on the address. You will not always get their report. You can still tell your agent about any water, wind, or hail claim the seller discloses, because the company will often see it anyway.

Replacement cost, not the contract price

The dwelling limit should be the cost to rebuild, not the price on the purchase contract and not the county’s tax appraisal. Land is not insured. A house that sold for less than it would cost to rebuild is underinsured if you copy the sale price onto the policy. A house that sold for more, because of the lot or the neighborhood, does not need a dwelling limit equal to that higher number.

Actual cash value pays replacement cost minus depreciation. Replacement cost, when the form provides it, pays to repair or rebuild without subtracting depreciation, usually subject to the limit you bought and to any coinsurance or insurance-to-value clause in the form. Ask the agent which one the quote uses on the dwelling, and what percentage of rebuild cost you must carry for the replacement-cost settlement to apply. Write that percentage down. Do not leave it as “full coverage,” which is not a policy term.

The deductible is what you pay first. A higher deductible lowers the premium. If wind or hail has its own deductible, it may be a percent of the dwelling limit. On a $250,000 dwelling limit, a 2 percent wind or hail deductible is $5,000. That figure is an example so the math is visible. It is not a Tennessee average and not a required deductible. Your quote controls.

Hail, flood, and earthquake are three conversations

Hail and wind are often part of a standard homeowners form, subject to the deductible and to any cosmetic-damage or roof-surface limit the form actually contains. Do not assume the roof is covered at replacement cost because the dwelling is. Read the roof endorsement. Tennessee hail claims are their own topic, and the details belong on the declarations page, not in a statewide rule this page does not have.

Flood is not a homeowners peril. Surface water and rising water need a flood policy if you want that coverage, and some lenders require it from the elevation of the house. Earthquake is separate enough that TDCI publishes its own consumer guide for earthquake insurance, listed next to the homeowners material. If you want earthquake coverage, ask for that guide’s subject as its own quote. Do not assume the homeowners package includes it because Tennessee sits near the New Madrid zone. Proximity is not coverage.

If the first companies decline

Get the reason in writing. A roof the company will not insure is a repair you may still be able to negotiate with the seller. A decline you do not understand will be repeated by the next company.

This page does not name a Tennessee residual plan. The department’s public homeowners page, at the time of writing, lists consumer guides, CLUE, and complaint and license tools. It does not set out a last-resort policy the way Missouri’s FAIR Plan and the Texas FAIR Plan do on their own sites. Ask a Tennessee-licensed agent what is available after real declines, and confirm the license with TDCI before you pay a premium. The department’s published phone number is 615-741-2241, and its published address is 500 James Robertson Parkway, Nashville, TN 37243-0565.

Keep any current renter’s policy until the homeowners policy is in force and you have the keys. A decline on the house you are buying does not cancel the policy on the apartment you are leaving. Cancel that one on purpose, after the overlap.

Bring the agent the year built, the roof material and age, the square footage, and photos of the roof and the electrical panel. If the inspection is finished, send the report. A company that can see the roof will give you a yes or a no. A company that is guessing will ask for the photos later, which is how closings slip.

The binder the lender will accept

• Named insureds match the deed and the loan.
• Mortgagee clause matches the lender’s instructions, including the address where they want notices.
• Dwelling limit is the rebuild figure, and the form says whether settlement is replacement cost or actual cash value.
• Effective date covers the closing date and any early possession.
• Deductibles, including any separate wind or hail deductible, are the ones you agreed to.

Questions Tennessee buyers ask

Related reading

• Does insurance cover hail damage in Tennessee?
• Tennessee flood insurance by location
• Tennessee landlord insurance
• What to do when homeowners companies decline the house
• How homeowners coverage is put together
• Levers that change a homeowners premium