Is homeowners insurance required?

Is homeowners insurance required? You may be pleased to find out that there are no legal requirements for homeowners coverage. However, that doesn't mean that homeowners insurance isn't required, as many mortgage lenders won't let you close on a house until you have coverage. Even though homeowners insurance isn't required if you own your home free and clear, it can protect you against various threats for around $1,000 a year.

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Chris Tepedino is a feature writer that has written extensively about home, life, and car insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, researching investigative pieces, and crafting detailed, data-driven features. His works have been featured on CB Blog Nation, Flow Words, Healing Law, WIBW Kansas, and C...

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent

UPDATED: Dec 5, 2021

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The Rundown

  • Homeowners insurance isn’t required legally
  • Mortgage lenders will require it before closing
  • It protects the lenders investment in the house

Is homeowners insurance required? While it may not be legally required, mortgage companies won’t typically let you close on a house without it.

You’ll need to prove that the homeowners insurance policy will cover any damages to the house, so the lender knows their investment is protected.

While you’re researching when home insurance is required, enter your ZIP code into our free quote tool to see what you could pay for a comprehensive policy.

Do you need homeowners insurance before closing?

There are no laws that force homeowners to buy into any insurance policy before purchasing the home. However, if you’re applying for the money for the house with a mortgage, you’ll likely be required to get a homeowners insurance policy before the sale is final.

While it may not be required, a comprehensive homeowners insurance policy can help protect your investment in your home. You can file claims and get simple things repaired with the right insurance before they become more significant issues.

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What is homeowners insurance?

According to the Insurance Information Institute, homeowners insurance gives you financial protection for your house if there is an accident or natural disaster.

Some of the things that are covered under a standard homeowners insurance protection include:

  • Your home’s structural integrity
  • Internal systems like plumbing and electricity
  • Legal responsibility for anyone hurt in your home
  • Items in your house or vehicles

Coverage will vary between insurers, but homeowners insurance is typically sold as a package, meaning you get many coverages in one policy.

Also, depending on where your insurer is located in the country, you may only be covered against specific incidents. For instance, someone living in the Great Basin might not be protected against floods, while someone on vast rural land might not have coverage against theft.

Your insurer will discuss what coverage is best for you and how to save on your rates while getting the most out of your auto insurance policy.

In what cases is homeowners insurance required?

State and federal laws do not require homeowners insurance, but your mortgage company will likely need it. The lender does this to protect their investment in the house. The mortgage company will want anything broken replaced immediately.

How much does homeowners insurance cost?

According to Business Insider, the home’s value, location, and amount of coverage can all impact how much you pay for insurance. The average annual rates for homeowners insurance in the U.S. is $1,015 a year.

The range from state to state largely stays within a couple of hundred dollars. The real difference in cost will come from the value of your home.

What doesn’t home insurance cover?

As mentioned above, your home insurance will likely differentiate between particular types of coverage for certain natural disasters. For instance, there are different policy types, including:

  • Flood
  • Earthquake
  • Maintenance

You can still get coverage from your insurer with the above issues, but it will cost you more. You’ll also need to have the coverage ahead of any accidents.

Is homeowners insurance required for a mortgage?

When you sign up for a mortgage, the lender takes your house as an investment. The lender will pay for the house, and you’ll get to pay them back in your own time.

The bank makes a profit by charging you an agreed rate on the amount you’ve borrowed, increasing it over time. So by the end of your mortgage, you’ll have paid the insurer back for more than they gave you to begin with.

A homeowners insurance policy matters to your mortgage lender because they need to know that you will take care of their investment.

The bank won’t just take your word that you’ll fix any damages. An insurance policy is proof you’re taking the opportunity to make sure the house is protected.

Do you need homeowners insurance if you don’t have a mortgage?

Homeowners insurance may not be required by any state or federal laws, but ensuring you have a quality policy can save you money. For example, your homeowners insurance rates are nothing considering what you could pay in repairs when a tree falls on your garage.

Homeowners insurance can protect you from a variety of issues that could occur to your home, including:

  • Fire
  • Smoke
  • Theft
  • Vandalism
  • Weather events

Plus, with extended coverage, you can protect against everyday wear and tear as well as natural disasters like floods and earthquakes.

Imagine how much a fire inside your home might cost, not to mention replacing any valuables you lost in the flames. You can get the repairs you need and have your insurable items reimbursed with a homeowners insurance policy. The cost of protection against fire is invaluable.

How can homeowners insurance protect you financially?

Mortgage lenders require homeowners insurance because it’s much cheaper than paying for repairs out of pocket.

An insurance policy will cover the repairs as opposed to you or the mortgage lender having to shell out large sums to make the house livable again. While it may raise your rates when you file a claim, it will likely be nothing compared to the total cost of the accident.

However, that is something that a homeowners policyholder should consider. If you’re thinking about filing a claim with your homeowners insurance company, think about:

  • The cost of repairs – If your deductible is $750 and the bill for repairs comes out to be $780, you might want to pay out of pocket to avoid raising your rates.
  • Document the damage – In case it worsens over time, make sure you document the damage as it occurs safely. Always listen to emergency personnel.
  • Get a second opinion – If you feel the cost of repairs is off, get another quote.

As long as you go into the claims process with good intentions and lots of proof, you shouldn’t have any problems getting your coverage.

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Homeowners Insurance Requirements: The Bottom Line

While you are not required to carry homeowners insurance by law, most mortgage companies will require a policy. To protect their investment, you’ll likely need to provide proof of coverage before closing on the house.

Is homeowners insurance required? Enter your ZIP code into our free quote tool to see how you can get an affordable homeowners policy today.

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