An official website of the United States Government

What is homeowner's insurance? Why is homeowner's insurance required?

Homeowner’s insurance pays for losses and damage to your property if something unexpected happens, like a fire or burglary. Standard homeowner’s insurance doesn’t cover damage from earthquakes or floods, but it may be possible to add this coverage. Homeowner's insurance is also sometimes referred to as "hazard insurance."

Many homeowners pay for their homeowner’s insurance as part of their monthly mortgage payment. You make the payments to the lender, and the lender holds the part of the payment that is for insurance in an escrow account. Then, when the bill for the insurance is due, the lender pays it from the escrow account.

The cost of your homeowner’s insurance, as well as any similar insurance to protect the property, is listed on page one of your Loan Estimate, in the “Projected Payments” section. However, it’s usually a good idea to do your own research about how much homeowner’s insurance costs.  You can shop separately for homeowner’s insurance, and choose the provider and plan that is right for you.  

When you have a mortgage, your lender wants to make sure your property is protected by insurance. That’s why lenders generally require proof that you have homeowner’s insurance. If you don’t have insurance, your lender is allowed to buy it for you and charge you for it—but your lender must give you advance notice. If your lender buys insurance on your home because you did not keep up your homeowner’s insurance, that insurance may only cover the lender, and not you. It also may be more expensive than what you could buy on your own.  

Homeowner’s insurance protects your property. Homeowner’s insurance is not the same as mortgage insurance.  

Note: You won’t receive a Loan Estimate if you applied for a mortgage prior to October 3, 2015, or if you're applying for a reverse mortgage. For those loans, you will receive two forms – a Good Faith Estimate (GFE) and an initial Truth-in-Lending disclosure  – instead of a Loan Estimate. Information about the cost of homeowner’s insurance can be found in Block 11 of your Good Faith Estimate (GFE). If you are applying for a HELOC, a manufactured housing loan that is not secured by real estate, or a loan through certain types of homebuyer assistance programs, you will not receive a GFE or a Loan Estimate, but you should receive a Truth-in-Lending disclosure.

Can't find your question? Make a suggestion!

Suggest a question