Do I Need Homeowners Insurance To Own a Home?

State law doesn’t require homeowners insurance but you will generally need to purchase coverage before you can be approved for a loan through a mortgage lender. In addition, it’s recommended that you maintain homeowners coverage even when it isn’t required in order to protect yourself from potential financial losses.

Keep reading for more information on when you need to purchase a homeowners insurance policy and what is required to get homeowners insurance.

Key Takeaways Homeowners insurance is not required by law in any state. Mortgage lenders typically require you to have home insurance and may purchase force-placed insurance on your behalf if you don’t buy coverage yourself. A typical homeowners policy includes dwelling, other structures, personal property, loss of use, personal liability and medical payments coverage. It cost $1,213.89 per year on average to insure a home in 2022.

When Is Home Insurance Required?

Homeowners insurance is usually required if you need to finance your home by taking out a mortgage. In addition, if you join a homeowners association (HOA), it is possible that you will be required to purchase home insurance as part of your HOA agreement.

Keep in mind that states don’t have laws mandating homeowners insurance in the same way that they require car insurance. As a result, you do not have to keep your home insurance if your house is paid off and your neighborhood is not governed by an HOA, although it is still recommended that you maintain home insurance coverage.

Do Mortgage Lenders Require Home Insurance?

Mortgage lenders typically require you to have homeowners insurance since it allows them to protect their financial interest in your home. If you pledged your home as collateral, your lender would have the right to confiscate your home if you were to default on your loan. As a result, your lender will naturally want to insure your house against any peril that could damage or destroy it.

If you don’t maintain your home insurance, your lender may purchase a force-placed insurance policy on your behalf. While your lender would pay this policy’s premiums up front, they would most likely pass the cost off to you in the form of increased mortgage payments.

Force-placed insurance is typically more expensive than standard homeowners insurance. At the same time, it often excludes coverage types like personal property and personal liability insurance.^[1] To avoid paying more for less coverage, it’s best to buy insurance yourself before your lender has to step in.

How Much Homeowners Insurance Do Lenders Require?

Your lender will likely require you to buy home insurance with a high enough dwelling coverage limit to at least pay off your mortgage after a total loss.^[2] Depending on where you live, you may also be required to purchase flood and earthquake coverage since these natural disasters are not covered by most standard homeowners policies.^[3]

You should note that your insurance company may not fully reimburse you for property repairs unless your dwelling coverage limit is at least 80% of your home’s replacement cost.^[4] To avoid prorated insurance payouts, it’s best to purchase enough dwelling coverage to completely rebuild your house after a total loss.

What Are the Benefits of Having a Home Insurance Policy?

Home insurance protects your property and assets against a wide array of potential perils. See below for examples of risks homeowners could face and the types of coverage included in a standard home insurance policy that would cover them.

Scenario	Covered by
A drunk driver crashes into the side of your home	Dwelling coverage
Lightning strikes your shed and sets it on fire	Other structures coverage
Your water heater begins to suddenly discharge water and causes nearby appliances to short circuit	Personal property coverage
A thief steals your laptop out of your car	Off-premises personal property coverage
You have to temporarily move into a hotel after snow builds up on top of your home and causes the roof to cave in	Loss of use coverage
Your child accidentally throws a baseball through your neighbor’s window	Personal liability coverage
A friend sues you after their child falls and breaks their leg while trying to climb into your child’s treehouse	Personal liability coverage
Your father-in-law decides to go to the emergency room after tripping down your stairs and spraining his ankle	Medical payments coverage

Because of possible situations like these, it is generally worth maintaining homeowners insurance even if there is no state law requiring it. Otherwise, you could have to cover expensive medical bills, property repairs and legal fees entirely out of pocket.

How Much Does Home Insurance Cost?

The average cost of homeowners insurance in 2022 was $1,213.89 per year. Various factors will influence the exact amount you have to pay for coverage including the following:

• Your home’s age
• The condition of your roof
• Renovations, attractive nuisances and other added features
• The coverage limits and deductible you select
• Your claims history and credit score
• Your location

How Do I Get Homeowners Insurance?

You can compare homeowners insurance rates using an insurance marketplace like SmartFinancial to find the insurance company that can offer the best coverage for your needs and budget. Make sure you have the following information at the ready when you are requesting a home insurance quote:

• Personal information like your name, birthday, Social Security Number, marital status and address
• Your current home insurance details, if applicable
• The coverage types and limits you are interested in
• When you would like for your new home insurance policy to begin
• The number of people in your household
• The number and types of pets you have
• Details about your house like its age, size, condition, renovations, repairs, safety features and security systems
• Your mortgage information
• Your claims history

Methodology

SmartFinancial collected over 100,000 home insurance quotes from multiple counties and insurance companies in each state to produce an average price per state. We then averaged the state averages to obtain a national average price for home insurance in the United States. Home insurance quotes were based on homes with a $250,000 dwelling value.