Do I Need Homeowners Insurance To Own a Home?
 Written by Preston Micalizio Preston MicalizioPreston Micalizio writes insurance content for SmartFinancial. He brings three years of professional experience writing ... Read more |  Edited by Richard MurphyRichard MurphyRichard Murphy manages content on SmartFinancial's website. With a strong background in content strategy and copywriting... Read more |
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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 insurance coverage even when it isn’t required to help protect yourself from potential financial losses.
Keep reading for more information on when homeowners insurance is required, whether you need homeowners insurance and what is required to purchase a policy.
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Key Takeaways
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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 may 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 homeowners insurance because it protects 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 homeowners 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 for personal property and personal liability insurance.[1]
How Much Homeowners Insurance Do Lenders Require?
Your lender will likely require you to buy homeowners 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]
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 may face and the coverage included in a standard home insurance policy that would protect them.
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Scenario |
Covered by |
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A drunk driver crashes into the side of your home |
Dwelling coverage |
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Lightning strikes your shed and sets it on fire |
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Your water heater begins to suddenly discharge water, causing nearby appliances to short-circuit |
Personal property coverage |
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A thief steals your laptop out of your car |
Off-premises personal property coverage |
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You have to temporarily move into a hotel after snow builds up on top of your home and causes the roof to cave in |
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Your child accidentally throws a baseball through your neighbor’s window |
Personal liability coverage |
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A friend sues you after their child falls and breaks their leg while trying to climb into your child’s treehouse |
Personal liability coverage |
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Your father-in-law decides to go to the emergency room after tripping down your stairs and spraining his ankle |
Given situations like these, it is generally worth maintaining homeowners insurance even if there is no state law requiring it. Otherwise, you may 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 is $2,110 annually, or about $176 per month.[5] 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 offers 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 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
- Insurance quotes /
- Home /
- Is Homeowners Insurance Required
Preston Micalizio writes insurance content for SmartFinancial. He brings three years of professional experience writing in various industries, from higher education to e-commerce. He strives to engage with the audience, provide accurate reporting and make complex subjects easily digestible.
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