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Is Homeowners Insurance Required? What Buyers Should Know

April 13, 2024 3-minute read

Author: Breyden Kellam

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Buying a home is one of the largest purchases you’ll make in your lifetime. Having a homeowners insurance policy can financially protect you in the event of an unforeseen peril or loss of your home. While it no doubt offers many benefits, is homeowners insurance required?

Read on to learn whether home insurance is required, along with compelling reasons to consider having an insurance policy for your home.

Do You Need Homeowners Insurance?

Homeowners insurance is not legally required, but a home buyer’s mortgage lender will most likely require it in order to financially protect themselves and the buyer in the case of an unexpected event.

Even a homeowner who doesn’t need a mortgage should still seriously consider purchasing a homeowners insurance policy. Homeowners insurance provides financial and liability protection in the event of unexpected loss or damage to your home. This means that a homeowner won’t have the heavy responsibility of paying out of pocket for any unforeseen damage, so long as it’s included in their insurance policy.

What States Require Homeowners Insurance?

Homeowners insurance isn’t required by law in any state. However, mortgage lenders will usually require that buyers have a home insurance policy. The cost of your policy and coverage options will vary from state to state.

For example, for higher risk states that are susceptible to natural disasters like floods, fires, or tornadoes, you’ll likely need specific coverage and may end up paying a bit more.

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Home Insurance Requirements For Homeowners

Home insurance requirements will vary depending on your mortgage lender as well as several other factors. Most lenders will require that you at least have a standard home insurance policy. However, depending on what state you live in, you may be required to purchase additional coverage for natural disasters specific to your area, such as flood or earthquake coverage.

Why Should I Get Homeowners Insurance?

Whether you have a mortgage or not, there are many benefits to having a homeowners insurance policy. Let’s briefly consider just a few.

It Offers Financial Protection

Your home is a precious asset that can provide value for years to come. However, it can just as easily become a liability if not properly insured. Without homeowners insurance, you as a homeowner are financially responsible for anything that may happen to your home. If an unexpected loss or damage occurs, you’ll be expected to pay out of pocket for replacements and repairs.

Homeowners insurance offers financial protection, covering the cost of any expense included in your policy. A standard home insurance policy generally covers the structure of your home, your personal belongings, liability, medical payments and other additional living expenses that may result from your house being damaged.

It Helps With Unexpected Costs

Homeowners insurance also helps with unexpected costs that may arise when your home has been compromised by a peril. For example, you’ll likely have to spend extra money on food and lodging if you cannot live in the home while it’s repaired. Once you file a homeowners insurance claim after a natural disaster or other incident and it’s approved, you can receive payment to cover such emergency expenses.

FAQs

Here are answers to some frequently asked questions about homeowners insurance:

Is homeowners insurance required by law?

While homeowners insurance isn’t required by law, mortgage lenders typically require buyers to have homeowners insurance. This protects both the lender and the buyer in the event that anything happens to the property.

Is mortgage insurance the same as homeowners insurance?

Mortgage insurance is designed to protect a lender from any financial loss they could incur if a buyer ends up unable to make their mortgage payments. Homeowners insurance, on the other hand, financially protects the homeowner from any unexpected damages or losses covered by their insurance policy.

Why do lenders typically require homeowners insurance?

Although homeowners insurance isn’t legally required, lenders usually require homeowners to purchase insurance. Since lenders have financial interest in the property, a homeowners insurance policy ensures they receive compensation for any incidents covered by the policy.

Is it okay to not have homeowners insurance?

If you don’t have a mortgage on your home, you aren’t required to have homeowners insurance. However, it’s important to be fully aware of the risks that come with not having a homeowners insurance policy. Homeowners insurance can protect your property, belongings, and your financial investment, as well as offer liability protection in the event of an unexpected loss.

The Bottom Line: Homeowners Insurance Is Typically Required By Lenders

As we’ve discussed, homeowners insurance isn’t required by law but mostly all mortgage lenders will require you to have an insurance policy. This requirement, though, can actually protect your financial investment as a buyer in case anything happens to your home.

If you feel ready to become a homeowner, applying for a mortgage is the first step in an exciting journey to homeownership. Start the mortgage process today with Rocket Mortgage®.

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Breyden Kellam

Breyden Kellam

Breyden Kellam is a writer covering topics on homeownership, finance, lifestyle and more. She is a graduate of the University of Michigan with a Bachelor of Arts degree in English. With a deep love for all things literary, Breyden is passionate about using her words to touch hearts and positively impact lives.