Homeowners insurance covers damage to your home and its contents from fire, wind, theft, and most other common hazards. It also includes liability coverage if someone is injured on your property. Every mortgage lender requires it as a condition of the loan, for as long as the loan exists.
You're free to shop for the policy from any insurer you choose — the lender doesn't pick your carrier, only the minimum coverage requirements.
How it works
Your policy is priced based on your home's location, age, construction, claims history, and chosen deductible — the amount you pay out of pocket before coverage kicks in on a claim. A higher deductible generally lowers your premium; a lower deductible raises it.
Get at least three quotes before closing — the difference between insurers for an identical coverage level can run into hundreds of dollars a year, and that difference compounds over the life of your homeownership.
If you escrow your taxes and insurance, the lender collects a share of the annual premium with each mortgage payment and pays the insurer when the bill comes due. Keep an extra copy of your declarations page — the summary document showing your coverage — since underwriters and lenders regularly request it before closing and at renewal.
When it matters to you
Homeowners insurance matters before closing, since you typically need a policy in place and proof of coverage delivered to your lender before the loan can fund.
It matters every year after that too — premiums can rise noticeably at renewal, especially in areas with higher wildfire, wind, or flood exposure, which flows straight into your escrow payment.
Common mistakes
- Accepting the first quote without comparing at least two or three other insurers.
- Choosing the lowest possible premium without checking whether the deductible or coverage limits leave you underinsured for a real claim.
- Not reviewing the policy at each renewal — premiums and coverage details can change significantly year to year.
- Forgetting that standard homeowners insurance usually excludes flood damage, which requires a separate policy in flood-prone areas.
FAQs
Is homeowners insurance required to get a mortgage?
Yes. Every mortgage lender requires proof of homeowners insurance before the loan can close, and coverage must remain in place for as long as you have a mortgage.
Does homeowners insurance cover flood damage?
Generally no. Flood damage typically requires a separate flood insurance policy, which is often required separately in designated flood zones.
How is my premium calculated?
Insurers price based on your home's location, age, construction materials, claims history, coverage limits, and chosen deductible. Shopping multiple insurers is the most reliable way to find the best combination of price and coverage.