Understanding Homeowners Insurance for Tennessee Homebuyers

When you’re buying a home, homeowners insurance can feel like one more item on the closing checklist, but it’s an important one. It protects both you and your lender, and the right coverage can make a real difference if something unexpected happens.

Here’s what Tennessee homebuyers should know before they close.

Why lenders require homeowners insurance

Your lender wants to be sure the home (their collateral) is protected against major risks like fire, storm damage, or theft. Because of that, they require you to have a policy in place before closing.

The insurance company issues what’s called a binder, proof of coverage for your new home, which gets sent to your lender so your loan can finalize.

If your loan includes an escrow account, your lender will collect a portion of your annual premium each month and pay the bill on your behalf when it’s due.

What coverage usually includes

A standard policy covers:

• Dwelling coverage – the structure of your home itself

• Personal property – your belongings inside the home

• Liability protection – in case someone is injured on your property

• Loss of use – helps cover living expenses if your home is uninhabitable due to a covered claim

Every policy can be customized, and optional riders can add protection for things like high-value jewelry, electronics, or detached structures.

What affects your premium

Homeowners insurance costs can vary widely in Tennessee based on location, home type, and coverage level. Some of the biggest factors include:

• Rebuild cost: higher-valued homes cost more to insure.

• Credit: most TN insurers use a credit-based insurance score to assess risk.

• Location: areas prone to tornadoes or storms (like Middle Tennessee) may have slightly higher premiums.

• Roof age and condition: newer roofs can lower your cost.

• Claims history: both yours and the home’s past insurance claims may affect pricing.

Many homeowners save by bundling their policy with auto insurance or raising their deductible slightly.

Flood coverage

Tennessee homes aren’t typically required to carry flood insurance unless they’re in a designated flood zone, but it’s something worth checking, especially near rivers, lakes, or low-lying areas. Standard homeowners policies don’t cover flooding, so this would be a separate policy through the National Flood Insurance Program (NFIP), managed by FEMA. Flood insurance is also available through private insurers who participate in the NFIP.

Timing it right before closing

You’ll typically set up your insurance policy within the first week or two of the loan process. Try to get quotes early so you can compare coverage and premiums.

Your lender can’t finalize the loan without that proof of coverage, so getting ahead of it helps ensure a smooth closing.

The bottom line

Homeowners insurance is more than a closing requirement, it’s your first layer of financial protection as a new homeowner.

If you’re buying a home in Tennessee, visit HomeLoanLocals.com. You’ll be matched with one or two trusted local lenders who can walk you through the closing process, explain escrow and insurance requirements, and keep things simple—without the spam or sales pressure.